mktg 504 - product and product management a product is anything the consumer thinks it is!! dr....
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MKTG 504 - Product and Product Management
A product is anything the consumer thinks it is!!
Dr. Dennis PittaUniversity of Baltimore
PRODUCT
A complex bundle of attributesMost important element of the marketing
mix.Charles Revson: “In the factory we make
cosmetics, in the store we sell _HOPE”Elmer Wheeler: “Don’t sell the steak, sell the
SIZZLE.”
Product:
Not limited to goods - it is goods,ideas, services, people, organizations, places.
Product:
= Physical product + other tangible components
+ intangible components
+ social impact
Product Component Examples:
Physical good:wood, plastic, chemical (shaver)
Other tangibles:service, brand name, close shave, package
Intangible:Eminem likes it
Social Impact:More young men are clean shaven
What is the product?
University degree
Politician
You - Yourself as a job candidate
Really what is product?
ANYTHING A CONSUMER THINKS IT IS
Examples of what people think
Bubble-Yum Bubble Gum - MADE WITH SPIDER’S EGGS
Kentucky Fried RATWORMS in Big Macs
Product Life CycleA dynamic model of how product changes
over time.
Importance:
different product characteristics at each stage:
Lead to different marketing strategiesEmphasize different combinations of the 4
P’s.....
Sales & Profit Life Cycles
IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline
TimeTimeSal
esS
ales
&& p
rofi
tsp
rofi
ts (
$)($)
Important Characteristics => PLC
SALESRATE OF SALES GROWTH# OF COMPETITORSPRODUCTPROMOTIONAL STRATEGYPRICINGDISTRIBUTION
Tracking the PLC over time: PETRIFICATION
SALES __________RATE OF SALES GROWTH __________# OF COMPETITORS __________PRODUCT __________PROMOTIONAL STRATEGY __________PRICING __________DISTRIBUTION __________
Bucky Beaver and Ipana
Examples of Products in Each PLC Stage
Intro: DVD-R DRIVESGrowth: DVD’SShakeout: PC’SMat-Sat: VCR’SDecline: RECORD CHANGERSPetrification: IPANA TOOTHPASTE
CLASSIFYING PRODUCTS
Product Category (Class): Automobile/container/Timepiece
Product Form: Convertible/Tin Can/Watch - Wrist
Product Item (brand): Ford Probe/American Can/Seiko
How much effort would you spend buying chewing gum?
How much effort would you spend buying a refrigerator?
How much effort would you spend buying a one of a kind masterpiece by Rembrandt?
CLASSIFICATION OF CONSUMER GOODS
CONVENIENCESHOPPINGSPECIALTYUNSOUGHT
Specialty ProductsSpecialty Products Unsought ProductsUnsought Products
Shopping ProductsShopping ProductsBuy less frequently> Gather product information> Fewer purchase locations> Compare for:
• Suitability & Quality • Price & Style
Convenience ProductsConvenience Products
Special purchase efforts> Unique characteristics> Brand identification> Few purchase locations
New innovations> Products consumers don’t want to think about. >Require much advertising & personal selling
Buy frequently & immediately> Low priced> Many purchase locations> Includes:
• Staple goods• Impulse goods• Emergency goods
Consumer-Goods Classification
CLASSIFICATION OF CONSUMER GOODS
CONVENIENCE PURCHASED WITH A MINIMUM OF EFFORT
SHOPPING HEAVY COMPARISON OF PRICE, QUALITY, AND STYLE
SPECIALITY VERY STRONG BRAND PREFERENCE: SPECIAL TIME
AND EFFORT - PRICE NOT VERY IMPORTANT
CLASSIFICATION OF CONSUMER GOODS
UNSOUGHT
This is a difficult product. Examples:Life insurance to young unmarried menUmbrellas to young unmarried menVacuum cleaners to young unmarried men…..Chain Saws to young unmarried women….
Product Mix
WidthWidth - number of different
product lines
WidthWidth - number of different
product lines
LengthLength - total number of itemswithin the lines
LengthLength - total number of itemswithin the lines
Depth Depth - number of versions of each product
Depth Depth - number of versions of each product
Product Mix - Product Mix - all the product
lines offered
Product Mix - Product Mix - all the product
lines offered
Co
nsi
sten
cy
Product Mix Strategy
Decisions made at three levels:1 Product ITEM (specific version) - keep or
drop.
2 Product LINE (group of related products) - deepen or shorten.
3 Product MIX (composite of all products) - ‘what markets to be in’
Product Mix Strategy
1 WIDTH - How many different product line there are within the company.
(Sears - WIDE - Circuit City - NOT AS WIDE; Britches - NARROW)
Product Mix Strategy
2 DEPTH - The average number of items offered by the company within each line.
Maxwell House Coffee - DEEP; Sears - NOT SO DEEP
The LIMITED STORE - How deep?
Product Mix Strategy
3 CONSISTENCY - Relationship of products to one another - in end use. (i.e., INTERACTION - together)
G.E.; XEROX - GOOD CONSISTENCY
HUNT-WESSON -Paint, Matches, Food
Product Mix Strategy
A continual addition of new products and deletions of old to meet the company’s needs.
Something new...
New Product Development
Product Innovation Process (New Product Development)
Starts with a product idea
Let’s take a North American summer staple - corn
How does one hold corn on the cob?
How does one hold corn on the cob?
With a corn holder!!
What does corn look like?
One end is pointed
One end is blunt
What is a problem with ordinary corn holders?
It is tough to get them out of an ear that has been eaten
One sticks in the blunt end
Getting it out is often messy
The Solution?
The Pitta Improved Cornholder (PIC)
Stainless steel pins Plunger Spring
The Pitta Improved Cornholder
PIC Product Benefits
Easy to remove (the one stuck in the blunt end of the ear comes off easily)
Fun at parties - (dodge the flying corn cob)
Saves laundry (less mess, less laundry)
Where would someone get this idea?
…from eating corn!!
Product Innovation Process
1 IDEA GENERATION
Sources: Organization Secondary sources:
Patent Office; Idea Mills;Independent InventorsConsumers (e.g., Kleenex)
Who thought of the product:
Army nurses (after WWI)
Thought cellulose fiber bandages might be useful
‘Facial Tissue’
A product is anything someone thinks it is….
When was the last time someone blew his or her ‘face’?
We use Kleenex as a disposable handkerchief!
Is it a facial tissue??
Product Innovation Process - Stage 2
2 SCREENINGCritical evaluationPossible problems:
Rejecting a Good Product (Type 1 Error)
Accepting a Bad Product as a good one (Type II Error) (I would hate to
make this type testing HandgrenadesHandgrenades)
The Pitta Improved Cornholder (PIC) Critical Evaluation
We asked friendsWe asked our mothersWe asked our wivesWe demonstrated the PIC to
strangers...
Product Innovation Process - Stage 3
3 ECONOMIC ANALYSIS Forecast Sales Return on Investment Effect on Product Line Cash Flow Profit Breakeven Analysis
The Pitta Improved Cornholder (PIC) Economic Analysis
Breakeven Analysis
The first cornholder cost $27,000The second cost $.02Probable retail price for two=> $1Probable wholesale price for two
=>$.50
(PIC) Breakeven Analysis
Calculates # of units to be sold at a price to just breakeven
Fixed Cost = $27,000Variable Cost (per unit) = $.20 (2
holders, packaging, overhead)Price (wholesale) = $.50 per unit
(PIC) Breakeven Analysis
BE = FC/(P-VC) = units
BE (in units) = $27,000/(.50-.20) = 90,000 units
Forget it!
Product Innovation Process
4 DEVELOPMENTDetermining Product Benefits Creating the Package, Brand Name
5 TEST MARKETING(Small Scale Introduction)Marketing Plan
6 COMMERCIALIZATION (Roll Out)
MKTG 504 - Product and Product Management
Commercialization – the last stage of the Product Innovation ProcessDr. Dennis PittaUniversity of Baltimore
COMMERCIALIZATION
A public offering of the product to the marketplace
Two forms Commercialization - Nationwide Roll Out – limited geographic areas –
one at a time
Roll out – an example
Tio Sancho rolled out its new non-fracturing taco shell against the largest Tex-Mex food manufacturer – Old El Paso.
Tio Sancho was small with few resources
Roll Out vs. CommercializationCommercialization Roll
Out
very CostlyComplexHits the whole
market simultaneously (Comprehensive)
Less expensiveSimplerRisks being copied
in the regions not covered
2 1/2%Innovators
13 1/2%Early
adopters
34%Early
majority
34%Late
majority
16%Laggards
Time of adoption innovations
Adopter Categorization of the Basis of Relative Time of Adoption of Innovations
What is a Brand?
Features BenefitsBenefits Advantages
Culture
User
Personality
Good Brand Names:
SuggestProductBenefits
Distinctive
Lack PoorForeign
LanguageMeanings
SuggestProductQualities
Easy to:PronounceRecognizeRemember
Product Differentiation
FormFea-
turesPerfor-mance
QualityConform-
anceQuality
Dura-bility
Relia-bility
Repair-ability
Style Design
Maturity Stage
Market ModificationProduct ModificationMarketing-Mix Modification
Decline Stage
Increase investmentResolve uncertainties - stable
investmentSelective nichesHarvestingDivesting
Market Evolution
EmergenceGrowthMaturityDecline
Upcoming Topic
PRICE