Transcript Elements of Marketing Strategy and Planning

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CHAPTER 7:
PRODUCT STRATEGY
AND NEW-PRODUCT
DEVELOPMENT
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
McGraw-Hill
Education
Part 3: Develop the Value Offering—The Product
Experience
LEARNING OBJECTIVES
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




Understand the essential role of the product experience in
marketing
Define the characteristics of a product
Recognize how product strategies evolve from one product
to many products
Understand the life of a product and how product strategies
change over time
Recognize the importance of new-product development to
long-term success
Understand the new product development process
Identify how new products become diffused in a market
Product Characteristics
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
A product is anything that
delivers value to satisfy a
need or want and includes
physical merchandise,
services, events, people,
places, organizations,
information, or ideas.
Product Characteristics
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
Defining the Product
 Essential
Benefit is the fundamental need met by
the product (getting from point A to point B on an
Southwest Airlines)
 Core Product is the physical, tangible elements. (One
kind of aircraft, low fares, good website)
 Enhanced Product includes additional features,
designs, and innovation that exceed expectations.
(Frequent flyer program, fun and entertaining flight
attendants)
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Four Products and Their
Essential Benefits
EXHIBIT 7.2
DEFINING THE PRODUCT AT SOUTHWEST AIRLINES
CHAPTER 01
Enhanced Product
Experiences exceed minimum expectations
Frequent flyer programs
Reserved seating
Core Product
On time
Safe
Experience matches expectations
Essential Benefit
Moving from Point
A to Point B
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Product Classifications
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Tangibility – physical
aspects of the product
experience
 Durability – product
usage

Product Classifications
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
Consumer Goods
Convenience
Goods
Shopping
Goods
Specialty
Goods
Unsought
Goods
Product Classifications
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
Business Goods
Materials
Parts
MRO
Supplies
Capital
Goods
Product Discrimination: Create
a Point of Differentiation
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Form
Style
Features
Performance
Quality
Repairability
Conformance
Quality
Reliability
Durability
1010
Product Plan: Moving from One
Product to Many Products
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Product Line: A group of products linked
through usage, customer profile, price
points, and distribution channels or
needs satisfaction
 Product Mix: all the products offered by
a company

Product Decisions Affect other
Marketing Mix Elements
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Pricing
Individual product pricing within the product line
 “good, better, best” product line strategy
 Technology companies face special challenges as newer
models have better features and lower prices


Marketing Communications
Focus on a single product or the brand?
 Allocation of budget: Most popular products? Entire line?
New products?
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BUILDING THE
PRODUCT EXPERIENCE
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
Product Life Cycle
Product
Life Cycle Sales Revenue and
Profitability
Product Life Cycle Timeline
Product Life Cycle Caveats
CHAPTER 01
EXHIBIT 7.12
THE PRODUCT LIFE CYCLE
Reprinted from Roger Kerin, Steven Hartley and William Rudelius, Marketing 9E, 2009.
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Product Life Cycle
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
Introduction Phase
Market
Conditions
Strategy
Product
Price
Marketing
Communications
Distribution
10-15
Product Life Cycle
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Growth Phase
Market
Conditions
Strategy
Product
Price
Marketing
Communications
Distribution
Product Life Cycle
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
Maturity Phase
Phase
defined by the sales growth of
the product category
1.
2.
3.
Relative Market Expansion
Market Stability
Market Deterioration
Product Life Cycle
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Maturity Phase
Market
Conditions
Strategy
Product
Price
Marketing
Communications
Distribution
Product Life Cycle
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Decline Phase
Market
Conditions
Strategy
Product
Price
Marketing
Communications
Distribution
New Products Defined
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 Company
Perspective
 New-to-the-World
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
Disruptive Innovation are so innovative they create a
fundamental change in the marketplace. Ex. Cell phones, tablets
Sustaining Innovations are newer, better faster versions of
existing products or additions to existing product lines. Ex. Diet
Coke, Coke Zero
 Reposition

Add new market segments Ex. Cell phones from business usage
to adults to teens
 Cost

Existing Products
Reduction
Introduce lower cost products with fewer features or scaled
back warranty or service
New Products Defined
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 Customer’s
 The
Perspective
customer’s perspective is much more
narrow and self directed.
 The customer is most interested in an answer to
the fundamental question—is this new product
new to me?
 First purchase of a cell phone , house or auto
can be a intimidating experience
Why do Products Fail?
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New Product
Development Process

The three major activities in new
product development are:
1.
2.
3.
Identify Product Opportunities
Define the Product Opportunity
Develop the Product Opportunity
Identify Product Opportunities
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
Generate New Ideas
Internal
External
Customers
Distributors
Identify Product Opportunities
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Screen
and Evaluate Ideas
Go-to-Market
Mistake
Firm
fails to keep a bad product idea
from moving into product development
Stop-to-Market
A
Mistake
good idea is eliminated prematurely
Identify Product Opportunities
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
Screen and Evaluate Ideas
 Prioritize
ideas that pass initial screening
and evaluation
 Time
to market (how long will it take to develop
and get the product to market).
 ROI (what is the expected return for the dollars
invested in the project).
 New product fit with overall company
product portfolio.
Define the Product Opportunity
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Define the Product
Opportunity
 Define
and test the product
idea
 Create a marketing strategy
 Analyze the product’s business
case
Define the Product Opportunity
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Define and Test the Product
Concept
 Product
 Define
Definition Objectives
the value proposition
 Identify the target market and purchase
frequency
 Delineate the product characteristics
 Look, feel, physical characteristics, features
Define the Product Opportunity
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Create the Marketing Strategy
Budget
Target
Market
Define the Product Opportunity
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Define the Product Opportunity
 Conduct
Business Case Analysis
 Total
Demand
 New purchases
 Repeat purchases
 Replacement purchases
 Profitability Analysis

Long and short term analysis
Define the Product Opportunity
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
Define the Product Opportunity
Conduct
Total
Business Case Analysis
Demand
 New
purchases
 Repeat purchases
 Replacement purchases
Profitability Analysis
Develop the Product Opportunity
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
Develop the Product Opportunity
 Develop The
Product
 Product Testing:
 Test
alpha and beta
the Market
 Consumer Product Market Tests
 Business Product Market Tests
 Product Launch
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CONSUMER ADOPTION AND
DIFFUSION PROCESS

Consumer Product Adoption Process
 Innovation
diffusion process is how long it takes a
product to move from first purchase to last purchase
(the last set of users to adopt the product).
 An individual moves through five stages before
adopting a product.
Awareness
Interest
Evaluation
Trial
Adoption
The Diffusion of Innovations
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