Chapter
4
Toby Claudio
 Head
of Retail and Business Development,
Quorum Group of Companies
 Young Market Masters Awardee 2008
Maslow’s Hierarchy of needs
Selfactualization
Ego
Social
Safety
Physiological
3 Types of Product
 1.
Durables
 Have a long interval between repeat
purchases
 2.
Non-durables
 Have stronger repeat purchases
 3.
Services
 Essentially intangible
1. Effort
the amount of money, time,
and energy the buyer is willing to
spend to purchase a given
product.
2. Risk
the buyer’s objective feeling
about the consequences of
making a purchasing mistake.
Three Levels of Product
Core
Augmented
Formal
Quality
 Companies
showing market share gains
typically outperformed their competitors
in three areas:



New productivity
Relative product quality
Marketing expenditures
Quality and customer
 Quality
is an important competitive
weapon that can result in increased
market share for firm.
 Quality
is measured through customer
satisfaction and not company.
Cost of Quality and non-quality

Quality has an indirect beneficial impact on
cost.

The higher quality product offered at the
same price to the customers will then be a
plus factor for firms in increasing market
share.

Cost of quality among manufacturers is
normally seen in terms of quality control
inspection and testing expenses, plus the
amount of production waste and rejects.
Look-Alike Products

Technology enables products to be
imitated and counterfeited more easily
nowadays.

Having a look-alike product using the
same or somewhat similar brand name is
the type of flattery the owner of the
legitimate brand name will never like.
G- Shock Watch
ISO

An important development in quality.

Formulated by the Geneva-based
International Organization for
Standardization (ISO).
New Product Opportunity

New products that can expand users and
usage are acknowledge as the source of
long-term growth for any firm.

New products must fit the company
mission and strategy.
New Product Development
Two sets of needs must be meet in new
product development:

1. Internal
 Looks at the company’s objectives and resources.

2. External
 Looks at the customer’s needs and wants.
Factors to consider in new product
development
New Product Development
Program

A new product development program is
needed for three purposes:
1.
To effectively respond to changing
customer’s needs and wants.
To effectively respond or preempt
competitors and other threats and fast;
and
To effectively respond to the company’s
expansion plan.
2.
3.
Environmental analysis and
assumptions for product
development







1. Customer lifestyle
2. Macro and micro economics
3. Raw materials costs, availability and limitations
4. Competition
5. Technology
6. Social forces
7. Government
NEW PRODUCT
DEVELOPMENT PROCESS
Exhibit 4-10: New Product Development Process
Product Criteria
Idea Generation
Idea Screening
Business Analysis
Prototype Development
Market Test
Full Commercialization
Product Criteria
• Kinds of products a firm will be selling,
or won’t be selling.
• Product criteria can be divided into:
o Must – mandatory or non- negotiable
o Wants – desirable but negotiable
Possible Product Criteria
for Retail Stores
3. Advertising Support
4.Profitability
5. Introductory Discounts
or Allowances
6. Company Reputation
Possible Product Criteria for a
Direct Selling Company
• 1. Not widely distributed at the retail stores
• 2. Not widely advertised in mass media
3. Attractive profit
margins
4. Affordable Pricing
5. Requires educational/ demonstration
effort to sell
6. Almost everyone can use and use
continuosly
Idea Generation
Idea Generation
3-Dimensional Mission
Statement
• A three-dimensional mission
structure identifying customer
benefit, customer groups , and
substitutes
Focus Group Discussion
(FGDs)
• Involves gathering together several
small groups of six to twelve people
who all have some similar
characteristics of interest to the
marketer.
BPI express
cash card
Waters
Philippi
ne
“Water
Bio
Mineral
Pot”
Using FGD’s for product ideas marketers
must be able to answer questions such as:
1. What are their problems associated with
the product?
2. Why are they having these problems?
3. How important are these problems?
Competitive Products
Segmentation
• Products that compete in a specific
market can be grouped to define
segments based on product identifies
rather than on individual consumer
attributes.
Perceptual Mapping
• An alternative to doing
Competitive Product
Segmentation.
• Concentrates only on the
determinant attributes of a
product.
Exhibit 4-17: Perceptual Mapping
Bank A
Bank C
Bank B
Bank D
 The
objective is to find an unoccupied
market niche.
 The
starting point is to determine how
existing consumers see existing products.
When I
dine:
With
friends
On dates
With
family
With
officemate
Alone
Jollibee
McDonalds
Greenwich
Chowking
Mang
Inasal
 Needed
to eliminate ideas generated with
poor or low potential, and allow those
with superior potential to go further.
 Weighted
average screening method can
established.
Production Criteria
Relative Weight
Product A
Product B
1. Company
Compatibility
By-product
Management skills
5
3
5
4
1
4
5
3
4
2. Market potential
Market size
Industry growth
Seasonality
Market shares
5
5
2
10
5
4
2
8
3
3
2
8
3. Marketability
Existing distribution
Easily promotable
Product differentiation
Number of competition
5
5
5
5
4
4
4
5
4
3
2
3
4. Finance
Capital required
Payback period
Profitability
5
10
5
5
8
5
4
8
4
5. Production
Development cost
Production expertise
Raw materials
Production capacity
Warehousing
Serviceability
5
5
5
5
2
3
5
4
4
4
2
3
5
5
3
4
1
2
100%
Accept
85%
Accept
76%
Reject
 1.
What customer need exist?
2
How will the proposed product satisfy the
consumer needs?
 3.
What specific product features will make
customer satisfaction possible?
 An
extension of idea screening stage.
 Critical “stage gate” of new product
development.
 Three
important things during business
analysis phase:



1. Target Market
2. Communication Plan
3. Financial Analysis and Marketing Mix Plan
“
How can the product benefit be
communicated in an effective way?”
 The
output describes the product positioning
strategy and how the product will be
distinguished from competitive products.
 Step
where preliminary estimates and
intelligent guesses are derived from
 Stage
that a budding product champion may
meet all key company decision makers.
 Set
the tone whether his new product
presentation in the future will be tarnished
by a negative first impression.
 Need
to make it easy for top management
to examine each step of the way
 Based
on preliminary marketing mix plan
PACKAGING