PRODUCT DEVELOPMENT

JOE BOB’sAMAZING CAT FOOD

“ All products are mortal”

(Part 2 of 2)

Organizing to Develop and Manage Products

Product manager … is responsible for a product, a Product manager … is responsible for a product, a product line, or several distinct products that make up a product line, or several distinct products that make up a groupgroup

Brand manager … is responsible for a single brandBrand manager … is responsible for a single brand Market manager … is responsible for all the marketing Market manager … is responsible for all the marketing

activities that serve a group of customersactivities that serve a group of customers Venture team …is a cross-functional group that creates Venture team …is a cross-functional group that creates

entirely new products. Team entirely new products. Team members come from different members come from different functional areas of the organization.functional areas of the organization.

Keys in Business Success

1. Calculated Risk Taking1. Calculated Risk Taking

- investing money- investing money

- P (B) of failure - success- P (B) of failure - success

2. Borrowing Ideas2. Borrowing Ideas

3. Specialty Products3. Specialty Products

- imaginative services- imaginative services

4. Structured Marketing Mix4. Structured Marketing Mix Assumption: target market problem solutionAssumption: target market problem solution

& skilled personnel& skilled personnel

SUCCESS

(Sales&Mktg. Exe. Inst., 1974)

Total Product Concept,Three Perspectives

EXPLICIT IMPLICIT EXTERNAL

Brand

Package

Warranty

Symbolism

Communication

Satisfaction

Social Effects

Pollution

Claim OnResources

Management Consumer Society View View View+ +

Product Differentiation...is creating products so that customers perceive them as different from

competing products

Form CreationForm Creation

Idea DemandIdea Demand

AcceptanceAcceptance Estimation Estimation

Profit

(A Manager’s View) a

Product design and features Product design and features - - style is the physical appearance, style is the physical appearance, ……

Product qualityProduct quality - - level and consistency of durability, …level and consistency of durability, …

Product support servicesProduct support services

- - Delivery, installation, … Delivery, installation, …

SPORTSDRINK

Sports Drink

Product Differentiation Through Quality, Design, and Support Services

HorizonOrganic

Milk

BordenMilk

Branding is fundamental to differentiation.

Influenced by Marketing Mix &Influenced by Marketing Mix &

* Available technology* Available technology

* Government standards* Government standards

* Level of competition* Level of competition

* “* “Consumer expectations”Consumer expectations” define product qualitydefine product quality

Product Differentiation through Quality

MARKETING

MIX

Principle:Principle: avoid promotions that “avoid promotions that “overpromiseoverpromise” benefits” benefits

Product QualityProduct Quality is the ability (characteristic) to is the ability (characteristic) to perform as expected in satisfying customer needsperform as expected in satisfying customer needs

Quality’s Lagging RolePercentage of Companies That Consider These

Criteria of Primary Importance in Compensating Senior Managers

0

5

10

15

20

25

30

35

40

45

50

Hospitals Autos Computers Banking

QualityPerformance

IndividualPerformance

Profit

Product Differentiation by Design

Product attributes (Product attributes (tangible or intangibletangible or intangible) separate ) separate your product from othersyour product from others

Colored paperclips that don’t rust

Product designProduct design allows functional allows functional performance of tasks & may provide a performance of tasks & may provide a competitive advantagecompetitive advantage

Product Differentiationthrough support services

Product Support ServicesProduct Support Services Are human or mechanical efforts that add Are human or mechanical efforts that add

value to a product such as financing, value to a product such as financing, warranties, guarantees, repairs & training.warranties, guarantees, repairs & training.

Are a competitive advantage when all other Are a competitive advantage when all other product features are equally matched by product features are equally matched by competitorscompetitors

Product Positioning is creating a desired product concept based on consumer perceptions.

Segmentation Segmentation isis grouping of grouping of people by needs or wants.people by needs or wants.

Positioning: Positioning: is the way consumers perceive the brand relative to its competitors caused by how how a product is marketed to attract a product is marketed to attract the targeted segment the targeted segment ID competitive advantage byID competitive advantage by

- Differentiating the product &Differentiating the product &- Stressing salient characteristicsStressing salient characteristics

Hypothetical Perceptual Map for Pain Relievers

Perceptual maps show marketers how closely products are conceptually positioned by consumers to “ideal points,” to their own products, and to competitors’ products.

Product Positioning and Repositioning Repositioning a Product Repositioning a Product

Adjusting a product’s present position can Adjusting a product’s present position can strengthen/increase its market share and strengthen/increase its market share and profitability.profitability. Repositioning is accomplished by changing the Repositioning is accomplished by changing the

product’s features, price, distribution, or image.product’s features, price, distribution, or image. Adding new products to the Adding new products to the

line may necessitate the line may necessitate the repositioning of older repositioning of older products.products.

Market Positioning Map: Tea-1980s

IcedIced HotHot

Traditional flavorTraditional flavor

Unique flavorUnique flavor

Luzianne Luzianne

LiptonLipton

TetleyTetley

Celestial SeasonsCelestial Seasons

NesteaNestea

Competitive Advantage

Repositioning: Tea - Late 1990s

IcedIced HotHot

Traditional flavorTraditional flavor

Unique flavorUnique flavor

Luzianne Luzianne

LiptonLipton

TetleyTetley

Celestial SeasonsCelestial Seasons

NesteaNestea

Arizona Iced TeaArizona Iced Tea

SnappleSnapple

Lipton RoundsLipton Rounds

Tetley RoundsTetley Rounds

Lipton Natural TeasLipton Natural Teas

Lipton FlavoredLipton Flavored

Competitive Advantage

Re Positioning Strategies

DifferentiationDifferentiation

ProductProduct

Brand Own a word Benefits The people who use the product The way people classify the products

The Brand Race(Positioning)

Dr.Batory#1

BATTLE of the BRANDS

- ID competitive advantage- ID competitive advantage- Stress salient characteristics- Stress salient characteristics- Differentiate product- Differentiate product

Top editors of women’s magazines are being Top editors of women’s magazines are being replaced.replaced.

What Do Women Want-To Read?

• WSJ, 4June2001

Market Changes: The market for women’s Market Changes: The market for women’s magazines has shifted towards more magazines has shifted towards more specialized magazines.specialized magazines.

Older magazines that offer an overview of Older magazines that offer an overview of women’s issues such as beauty, fashion, women’s issues such as beauty, fashion, health, and sex are now finding themselves health, and sex are now finding themselves obsolete.obsolete.

Specialized Magazines

Real Simple – Real Simple – simplifying your lifesimplifying your life

Lucky – shoppingLucky – shopping In Style – FashionIn Style – Fashion Self – Health/BeautySelf – Health/Beauty

Glamour

Bonnie Fuller was fired after Bonnie Fuller was fired after sales fell 11% in 2002.sales fell 11% in 2002.

Under her leadership, the Under her leadership, the magazine started to look too magazine started to look too much like Cosmo, its top much like Cosmo, its top competitor.competitor.

Wants to go back to its old Wants to go back to its old ways of putting out serious ways of putting out serious pieces about health and pieces about health and politics.politics.

Kathy Betts was fired as Kathy Betts was fired as editor in chief editor in chief

Sales had declined over Sales had declined over 7% last year and there was 7% last year and there was a definite increase in staff a definite increase in staff turnover turnover

Under Betts the magazine Under Betts the magazine was starting to lose its was starting to lose its reputation for reputation for sophisticated fashion sophisticated fashion coverage.coverage.

Harper’s BazaarHarper’s Bazaar

Product Deletion

Product Deletion Product Deletion is the process of eliminating a is the process of eliminating a product from the product mixproduct from the product mix Reasons to remove a product:Reasons to remove a product:

Slow sales create higher unit-production costs, Slow sales create higher unit-production costs, inventory costs, and distribution costs.inventory costs, and distribution costs.

To prevent negative To prevent negative feelings from affecting the feelings from affecting the company’s other products.company’s other products.

Product Deletion Process

FIGURE 12.5

Source: Martin L. Bell, Marketing: Concepts and Strategy, 3rd ed., p. 267; Copyright © 1979, Houghton Mifflin Company. Reprinted by permission of Mrs. Martin L. Bell.