Product
Decisions
11
Developing and
Managing Products
Copyright © Houghton Mifflin Company. All rights reserved.
PowerPoint Presentation by Charlie Cook

• To understand how companies manage existing products through line extensions and product modifications
• To describe how businesses develop a product idea into a commercial product
• To understand the importance of product differentiation and the elements that differentiate one product from another
• To explore how products are positioned and repositioned in the customer’s mind
• To understand how product deletion is used to improve product mixes
• To describe organizational structures used for managing products
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11 –2

• Managing Existing Products
• Developing New Products
• Product Differentiation Through Quality, Design, and Support Services
• Product Positioning and Repositioning
• Product Deletion
• Organizing to Develop and Manage New
Products
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11 –3

• Line Extension
–Development of a product that is closely related to existing products in the line but meets different customer needs
• Is a less expensive, low risk alternative
• May focus on the same or a new segment
• Can be used to counter competing products
“Cheerios”
–Many “new products” are really line extensions.
“Honey-
Nut
Cheerios”
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11 –4

• Product Modifications
–A change in one or more characteristics of the product and the elimination of the original product from the product line.
• Product must be modifiable.
• Customer must be able to perceive modification has been made.
• Modified product more closely satisfies customers’ needs.
Tide
Tide with bleach
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11 –5

• Quality Modifications
–Changes in material or production processes related to a product’s dependability and durability
• Reducing quality to offer a lower price to customers
• Increasing quality to gain a competitive advantage
1st
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11 –6

• Functional Modifications
–Changes affecting a product’s versatility, effectiveness, convenience, or safety; usually requiring redesign of the product
• Aesthetic Modifications
–Changes to the sensory appeal of a product such as altering taste, texture, sound, smell, or appearance
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11 –7

• Benefits
–Enhances product mix
–Increases depth in product line
–Attracts new customers
–Increases market and customer share
• Risks
–Expensive to develop
–Creates risk of market failure
–Loss of market share without new products
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11 –8

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FIGURE 11.1
11 –9

• Idea Generation
–Seeking product ideas to achieve objectives
• Internal sources: marketing managers, researchers, sales personnel, and engineers
• External sources: customers, competitors, advertising agencies, consultants, and new-product alliances
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11 –10

• Screening
–Choosing the most promising ideas for further review
• Concerns about cannibalization of existing products
• Company capabilities to produce and market the product
• Nature and wants of buyers
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11 –11

• Concept Testing
–Seeking potential buyers’ responses to a product idea
• Low cost determination of initial reaction to product idea
• Identification of important product attributes and benefits
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11 –12

• Business Analysis
–Assessing the potential of a product idea for the firm’s sales, costs, and profits
• Does product fit in with existing product mix?
• Is demand strong enough to enter the market?
• How will introducing the product change the market?
• Is the firm capable of developing the product?
• What are the costs for developing and marketing?
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11 –13

Concept Test for a Tick and
Flea Control
Product
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FIGURE 11.2
11 –14

• Product Development
–Determining if producing a product is feasible and cost effective
• Construction of a prototype, or working model
• Testing of the prototype’s overall functionality
• Determining the level of product quality
• Branding, packaging, labeling, pricing, and promotion decisions
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11 –15

• Test Marketing
–Introducing a product on a limited basis to measure the extent to which potential customers will actually buy it
• Sample launch of entire marketing mix
• Lessens risk of larger market failure
• Is expensive; simulated test marketing is an alternative
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11 –16

• Commercialization
–Deciding on full-scale manufacturing and marketing plans and preparing budgets
• Modifications indicated by test marketing are incorporated into the production design.
• Marketing, distribution, and servicing plans are finalized.
• Product roll-out occurs in stages to lessen the risks of introducing the new product.
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11 –17

Stages of Expansion into a National Market
During Commercialization
Source: Adapted from Herbert G. Hicks, William M. Pride, and James D. Powell, Business: An Involvement Approach .
Copyright © 1975. Reproduced with permission of The McGraw-Hill Companies.
Copyright © Houghton Mifflin Company. All rights reserved.
FIGURE 11.3
11 –18

• Product Differentiation
–Creating and designing products so that customers perceive them as different from competing products
• Perceived differences in product quality, product design and features, and product support services
• Branding —a crucial way to differentiate a product
Borden
Milk
Horizon
Organic
Milk
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11 –19

• Product Quality
–The overall characteristics of a product that allow it to perform as expected in satisfying customer needs
–Level of quality is the relative amount of quality a product possesses.
–Consistency of quality is the degree to which a product has the same level of quality over time.
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11 –20

• Product Design and Features
–Product design
• How a product is conceived, planned, and produced
• Good design provides a strong competitive advantage.
• Customers typically desire products with good designs and that function well.
–Styling is the physical appearance of a product
–Product features include specific design characteristics that allow a product to perform certain tasks
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11 –21

• Product Support Services
–Customer services
• Human or mechanical efforts or activities that add value to a product
• Delivery and installation, financing, customer training, warranties and guarantees, repairs, online product information
• A competitive advantage when all other product features are equally matched by competitors
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11 –22

• Product Positioning
–Creating and maintaining a certain concept of a product in customers’ minds
–A product’s position results from customers’ perceptions of a product’s attributes relative to those of competing products.
• Marketers emphasize characteristics most desired by the target market (or segment) in advertising.
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11 –23

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.
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FIGURE 11.4
11 –24

• Repositioning a Product
–Adjusting a product’s present position can strengthen/ increase its market share and profitability.
• Repositioning is accomplished by changing the product’s features, price, distribution, or image.
• Adding new products to the line may necessitate the repositioning of older products.
Mary Kay Cosmetics adds distribution through retail stores and online sales
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11 –25

• Product Deletion
–The process of eliminating a product from the product mix
–Reasons to remove a product:
• Slow sales create higher unit-production costs, inventory costs, and distribution costs.
• To prevent negative feelings from affecting the company’s other products.
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11 –26

Product Deletion Process
Source: Martin L. Bell, Marketing: Concepts and Strategy , 3rd ed., p. 267; copyright 1979, Houghton Mifflin Company; used by permission of Mrs. Martin L. Bell.
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FIGURE 11.5
11 –27

• Product/Brand Manager Approach
–Product manager
• The person responsible for a product, a product line, or several distinct products that make up a group
–Brand manager
• The person responsible for a single brand
–Market manager
• The person responsible for managing the marketing activities that serve a particular group of customers
–Venture team
• A cross-functional group that creates entirely new products that may be aimed at new markets
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11 –28

• Understand how companies manage existing products through line extensions and product modifications
• Be able to describe how businesses develop a product idea into a commercial product
• Understand the importance of product differentiation and the elements that differentiate one product from another
• Know how products are positioned and repositioned in the customer’s mind
• Understand how product deletion is used to improve product mixes
• Be able to describe organizational structures used for managing products
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11 –29

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11 –30

• The following slides (a listing of terms and concepts) are intended for use at the instructor’s discretion.
• To rearrange the slide order or alter the content of the presentation
–select “Slide Sorter” under View on the main menu.
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11 –31

• Line Extension
–Development of a product that is closely related to existing products in the line but meets different customer needs
• Product Modifications
–A change in one or more characteristics of the product and the elimination of the original product from the product line.
• Quality Modifications
–Changes in material or production processes related to a product’s dependability and durability
Copyright © Houghton Mifflin Company. All rights reserved.
11 –32

• Functional Modifications
–Changes affecting a product’s versatility, effectiveness, convenience, or safety; usually requiring redesign of the product
• Aesthetic Modifications
–Changes to the sensory appeal of a product such as altering taste, texture, sound, smell, or appearance
• Idea Generation
–Seeking product ideas to achieve objectives
• Screening
–Choosing the most promising ideas for further review
Copyright © Houghton Mifflin Company. All rights reserved.
11 –33

• Concept Testing
–Seeking potential buyers’ responses to a product idea
• Business Analysis
–Assessing the potential of a product idea for the firm’s sales, costs, and profits
• Product Development
–Determining if producing a product is feasible and cost effective
• Test Marketing
–Introducing a product on a limited basis to measure the extent to which potential customers will actually buy it
Copyright © Houghton Mifflin Company. All rights reserved.
11 –34

• Commercialization
–Deciding on full-scale manufacturing and marketing plans and preparing budgets
• Product Differentiation
–Creating and designing products so that customers perceive them as different from competing products
• Product Quality
–The overall characteristics of a product that allow it to perform as expected in satisfying customer needs
• Product design
–How a product is conceived, planned, and produced
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11 –35

• Styling
–The physical appearance of a product
• Product Positioning
–Creating and maintaining a certain concept of a product in customers’ minds
• Repositioning a Product
–Adjusting a product’s present position to strengthen/ increase its market share and profitability by changing the product’s features, price, distribution, or image
• Product Deletion
–The process of eliminating a product from the product mix
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11 –36

• Product Manager
–The person responsible for a product, a product line, or several distinct products that make up a group
• Brand Manager
–The person responsible for a single brand
• Market Manager
–The person responsible for managing the marketing activities that serve a particular group of customers
• Venture Team
–A cross-functional group that creates entirely new products that may be aimed at new markets
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11 –37

• Tropicana Pure Premium
Juices
• Tropicana 100% Pure
Juice
• Tropicana Season’s Best
Juices
• Copella Juices
• Tropicana Pure Tropics
Juices
• Hitchcock Juices
• Tropicana Twister Juice
Beverages
• Kirin-Tropicana Juices
• Dole Juices
• Looza Juices
• Fruit Smoothies and
Healthy Shakes
• Looza Nectars
• Juice Bowl Juices
• Juice Bowl Nectars
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11 –38

• Baked Lay’s Potato Chips
• Baked Tostitos Brand Tortilla
Chips
• Cheetos Brand Cheese
Flavored Snacks
• Chester’s Brand Crackers
• Doritos Brand Crackers
• Doritos Brand Dips
• Doritos Brand Tortilla Chips
• Fritos Brand Corn Chips
• Funyons Brand Onion
Flavored Rings
• Grandma’s Brand Cookies
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• Lay’s Brand Potato Chips
• Munchos Brand Potato Chips
• Rold Gold Brand Pretzels
• Ruffles Brand Potato Chips
• Sanitas Brand Tortilla Chips
• Smartfood Brand Popcorn
• Sunchips Brand Multigrain
Snacks
• Tostitos Brand Crackers
• Tostitos Brand Dip
• Tostitos Brand Tortilla Chips
• Baken-ets Brand Fried Pork
Skins
11 –39