Transcript Unit 5 - ClassNet

In your opinion,
what was the
most important
product ever
invented? Why?
Product Development
Product Development
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market research

customer wants

business opportunities

businesses decide whether or not to
provide product/service to satisfy
customers’ wants/needs
Product Development
Two important questions:
• can we produce it?
• can we sell it?
To answer them...
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Product Development
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The production & design team
says if a product can be produced
based on info gathered during
market research.
• do they have the facilities and
technology to create product
• costs
Helps marketing department set
price.
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Marketing department answers
“can we sell it”:
• production data helps set
price
• research competition
• develop positioning
strategies, distribution,
promotion
Product Development
Marketing department answers
“can we sell it”:
• consumer testing
• give results to production
and design team
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Product Development
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All businesses need to engage
product development at the
beginning of a new venture. It is
an ongoing, major activity.
The cooperation between the
marketing and production is
complex and constant.
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To start, a company does a
feasibility study to determine if a
business opportunity is possible,
practical, and viable.
All businesses perform
feasibility studies, some more
formal and complex than others.
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Invention or Innovation?
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Invention is the creation of a
completely new product, method,
or device. Businesses use
inventions to create original
solutions to meet consumer
needs.
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Invention or Innovation?
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Innovation is the change of
an existing product to use new
technology, items or processes.
There are more innovators
than inventors. Innovators look at
ways to improve on existing
products, methods or devices.
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Product Development
Stages of Product Development
Marketers use innovations
and inventions to make profit.
Inventors usually sell or license
ideas to others.
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Product Development
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Stages of Product Development
Innovators are usually
marketers; they are motivated
by profit:
better product
=
competitive advantage
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Stages of Product Development
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1. Idea Generation
Market research reveals
consumers want a new or
modified product. Or, marketers
ask “how can we improve our
product to improve sales?”
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Stages of Product Development
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2. Idea screening
Not all ideas are good—need
to see consumer reaction to the
new idea, and look at competition.
Many factors need to be taken
into account.
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Stages of Product Development
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3. Concept development
A prototype is made: a
sample of what the product will
look like and how it operates:
Does it work? Consumers like it?
Cost?
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Stages of Product Development
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4. Market strategy
Use market research to
establish primary and secondary
market. Develop marketing
strategy and marketing plan to
target primary market.
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Stages of Product Development
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5. Feasibility study
Often done at same time as
steps 4 and 6. Can it be made and
sold so that it is:
• affordable for the consumer,
and
• profitable for the company?
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Stages of Product Development
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6. Product design
Use preferences of primary
market. This includes features
such as warranty, instruction
manual, packaging, service
information.
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Stages of Product Development
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7. Test marketing
Get the product into the hands
of people who fit your primary
market profile. Have them use it
for a period of time, complete
survey to make suggestions.
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Stages of Product Development
8. Market entry
Start of product life cycle,
product is introduced to the
market.
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Product Development
BRAINSTORM
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Go through the PD Stages to
come up with improvements
for the product on your table
Product Development & Utility
Most businesses focus on
product innovation. By making
modifications to an existing
product, the value equation is
influenced by adding utility to
an item.
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Product Development & Utility
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UTILITY
• what is added to the
product to make it more
valuable
• affects the value equation
by providing the customer
with something they didn’t
have before
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UTILITY
could be:
• benefit (ie. easier to use)
• difference (ie. new flavour)
• information on use (ie.
baking soda not just for
baking)
Product Development & Utility
Form Utility
• a relationship between the
product’s form and function
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form - what it looks like
function - what it should do
Product Development & Utility
Form Utility
• form follows function—what
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the product does dictates
what it looks like
• innovations in production and
technology effect form
Product Development & Utility
Form Utility
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• can add value by making a
product more attractive
• also takes into consideration
material, scent, flavour,
colour, design, packaging
Product Development & Utility
Information Utility
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• provide the consumer with
instructions, directions, manuals
• examples: service reps, internet
sites, 24-hour hotlines
• also provided through
advertising, on packaging
Product Development & Utility
Place Utility
• putting the product where the
consumer can purchase it
• the easier, the more place utility
• examples: web sites with on-line
ordering, home delivery
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Product Development & Utility
Time Utility
• Providing product or service
when the consumer wants it
• examples: internet shopping and
banking, 24 hour stores,
extended hours
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Product Development & Utility
Possession Utility
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• making it easy for the consumer
to purchase the product
• examples: installment payment
plans, credit cards, discounts on
cash purchases, loans, lower
costs, etc.
Product Development & Utility
Tell me one thing about
one of the utilities:
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•form utility
•information utility
•place utility
•time utility
•possession utility
Product Development and
the Marketing Concept
Prod. Dev’ment & the Mktg Concept
Marketing Concept:
• consumers and competitors
should be considered in every
important business decision.
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Prod. Dev’ment & the Mktg Concept
Product Mapping
marketer will research:
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• what is already on the market
• what do consumers like/dislike
about products
• what is missing from the
market
Prod. Dev’ment & the Mktg Concept
Process
• Consumers group items by
factors using their perception
• place products on product map
See chart on page 193
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• ask consumers about importance
of factors
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• if there is a void in factors, or
product is lacking, the
manufacturer may improve that
• process is not important to show
what the product is, it’s used to
show what it’s not
• goal: find what the product
lacks, innovate and improve it
Product Mapping
unhealthy
Crush Orange
healthy
Store OJ
sweet
Crush Orange
not sweet
RealJuice
inexpensive
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RealJuice
Store OJ
expensive
Store OJ
RealJuice
Put into correct order…
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Concept development
Product design
Market entry
Idea generation
Market strategy
Test marketing
Feasibility study
Idea screening
3
6
8
1
4
7
5
2
Prod. Dev’ment & the Mktg Concept
Marketing Opportunity
Analysis
• also called situational analysis
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Prod. Dev’ment & the Mktg Concept
Part I: Overall Market
• identify category
• broad, includes every type of
product in the category
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Prod. Dev’ment & the Mktg Concept
Part II: Indirect
competition
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• group competitive brands by
features
• classifications are further simplified
to create direct and indirect
competition categories
• only addressed after all direct
competition opportunities exhausted
Prod. Dev’ment & the Mktg Concept
Part III: Direct competition
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• identify competitive brands which
compete for the same market
• examine for gaps, identify if the
market is
• not big enough for another
brand
• an opportunity
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• decide whether or not to enter a
market based on market
potential.
• Overall market potential =
number of possible buyers times
average price of product times
number bought per year
Prod. Dev’ment & the Mktg Concept
MP = N x P x Q
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Prod. Dev’ment & the Mktg Concept
MP = N x P x Q
MP for potato chips in Cambridge
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Number of customers:
30,000
Avg price of product:
1.50
Avg quantity bought/year:
50
Market potential:
$2,250,000
Prod. Dev’ment & the Mktg Concept
MP = N x P x Q
MP for hockey sticks in Canada
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Number of customers:
2,000,000
Avg price of product:
50.00
Avg quantity bought/year:
1
Market potential:
$100,000,000
Prod. Dev’ment & the Mktg Concept
MP = N x P x Q
MP for Benny’s uniform
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Number of customers:
Avg price of product:
Avg quantity bought/year:
Market potential:
1,600
40.00
8
$512,000
Let’s see what you know...
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Pick a product you’re familiar with.
On a separate sheet of paper
create a chart like the one on pg.
202 to explain how the producer
provides: form, place, information,
time and possession utility (where
applicable). Leave space for a
column for benefit analysis
(today’s topic).
Benefit Analysis
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Along with adding utility, a
feature should create a benefit.
Products need to satisfy consumer
needs/wants and add to the value
equation.
A feature-benefit analysis
connects each factor to the utility
and benefit created for the
consumer.
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Once this is completed, the
data can be used in a costbenefit analysis: estimated
cost of feature
in comparison
to the benefit
it gives.
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Information is contributed
by marketing, finance,
production, and research
departments to see if a benefit
to the consumer is worth the
cost to the
company.
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FOR THE REST OF PERIOD
• Finish reading to end of pg. 197
• Complete activity from start of
class by completing benefit
analysis column (see pg. 202)
• Answer reflection question at
end of pg. 201
HAND IN TODAY