Product Planning

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Marketing Essentials
n Chapter 30 Product Planning
Section 30.1 Product Planning,
Mix, and Development
Chapter 30 n Product Planning
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SECTION 30.1
Product Planning, Mix,
and Development
What You'll Learn
 The nature and scope of product planning
 The concept of product mix
 The different product mix strategies
 The steps in new product development
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SECTION 30.1
Product Planning, Mix,
and Development
Why It's Important
Product planning allows a business to make
or sell products that are wanted by
customers. Product planning is also used to
design appropriate marketing programs that
help create increased sales and profit
opportunities.
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SECTION 30.1
Product Planning, Mix,
and Development
Key Terms
 product planning
 product mix
 product line
 product item
 product width
 product depth
 product modification
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SECTION 30.1
Product Planning, Mix,
and Development
Product Planning
A product is anything a person receives in an
exchange—a tangible item (car), a service
(haircut), an idea (a good education), or a
combination of all of these concepts. Product
planning involves making decisions about
features needed to sell a business's products,
services, or ideas.
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SECTION 30.1
Product Mix
Product Planning, Mix,
and Development
Product mix includes all the different
products that a company makes or sells.
A large manufacturer may have hundreds of
products in its product mix.
Retail stores must plan their product mix
carefully because they cannot offer all of the
products that customers may want.
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SECTION 30.1
Product Planning, Mix,
and Development
Product Items and Lines
A product line is a group of closely
related products manufactured and/or
sold by a business.
A product item is a specific model,
brand, or size of a product within a
product line.
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SECTION 30.1
Product Planning, Mix,
and Development
Product Width and Product Depth
Product width refers to the number of
different product lines a business
manufactures or sells.
Product depth refers to the number of
product items offered within each product line.
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SECTION 30.1
Product Planning, Mix,
and Development
The Concept of Product Mix
Width of the Product Mix
Blades and
Razors
Toiletries
MACH 3
Sensor
Trac II
Atra
Swivel
Double-Edge
Lady Gillette
Super Speed
Twin Injector
Techmatic
Series
Adorn
Toni
Right Guard
Silkience
Soft and Dri
Foamy
Dry Look
Dry Idea
Brush Plus
Writing
Instruments
Lighters
Paper mate
Flair
Cricket
S.T. Dupont
The width and depth of product lines define product mix. What does product
depth tell you about the importance of a given product line? Why do you
think a company would choose to produce so many different razors?
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SECTION 30.1
Product Planning, Mix,
and Development
Product Mix Strategies
A product mix strategy is the plan for how the
business determines which products it will
make or stock. Businesses will either develop
a new product or expand an existing product to
add to their mix.
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SECTION 30.1
Product Planning, Mix,
and Development
Developing New Products
New products can add substantially to a
company’s overall sales and boost its market
share. New products can:
 make a company look innovative
 increase profits because they are generally
priced 10 to 15 percent above older items
 become a major part of a product line
Slide 1 of 2
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SECTION 30.1
Product Planning, Mix,
and Development
Developing New Products
New product development generally involves
seven key steps:
1. Generating ideas
2. Screening ideas
3. Developing a business proposal
4. Developing the product
5. Testing the product
6. Introducing the product (commercialization)
7. Evaluating customer acceptance
Slide 2 of 2
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SECTION 30.1
Product Planning, Mix,
and Development
Generating Ideas
New product ideas come from a variety of sources:
 customers
 competitors
 channel members
 company employees
 research and development departments
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SECTION 30.1
Product Planning, Mix,
and Development
Screening Ideas
Ideas for new products are screened and
evaluated, and matched against the company's
overall objectives to see if they fit. Some ideas
are eliminated. The best ideas are put through
further evaluation. Finally, one or two ideas are
selected for development.
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SECTION 30.1
Product Planning, Mix,
and Development
Developing a Business Proposal
A product idea must be considered in
regard to its potential for profit. A business
proposal is developed to evaluate the size
of the market, potential sales, production
requirements, costs, profit potential,
technological trends, and risk.
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SECTION 30.1
Product Planning, Mix,
and Development
Developing the Product
During product development, a prototype
(a model of the product) is made, and
marketers develop a marketing strategy.
The prototype is tested, and adjustments
are made to improve the final product.
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SECTION 30.1
Product Planning, Mix,
and Development
Testing the Product
Newly developed products are usually
tested to obtain customers' responses.
Common strategies are:
 test marketing in a certain
geographic area
 evaluation by a focus group
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SECTION 30.1
Product Planning, Mix,
and Development
Introducing the Product
If customer response is favorable, the product
is introduced into the marketplace. This stage
is called commercialization. The costs of
introducing a new product often are quite
high. At this stage, the company will need to:
 advertise the product
 create or revise a distribution network
 train its sales force
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SECTION 30.1
Product Planning, Mix,
and Development
Evaluating Customer Acceptance
After the product has been introduced,
marketers track new product performance
to evaluate customer acceptance of the
product and the marketing strategies used
to introduce the product.
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SECTION 30.1
Product Planning, Mix,
and Development
Developing Existing Products
In order to build on an established image,
appeal to new markets, and increase sales
and profits, companies can either:
 expand an existing product line or
 modify an existing product
Slide 1 of 3
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SECTION 30.1
Product Planning, Mix,
and Development
Developing Existing Products
Line Extensions Companies can expand
product offerings by adding new product lines,
items, or services.
 Example: Tylenol expanded to Tylenol Flu,
Tylenol Cold, and Tylenol Allergy/Sinus
Extensions can also be new lines of products.
 Example: Bic pens and Bic lighters
Slide 2 of 3
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SECTION 30.1
Product Planning, Mix,
and Development
Developing Existing Products
Product modification is an alteration in a
company's existing product. Product
modifications are a relatively quick and easy
way to add new products to a company's
product line.
Slide 3 of 3
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SECTION 30.1
Product Planning, Mix,
and Development
Deleting a Product or Product Line
Sometimes companies decide that they will no
longer produce or sell a particular product or
perhaps even a whole product line. Some of the
reasons for this are:
 obsolescence
 loss of appeal
 conflict with current company objectives
 replacement with new products
 lack of profit
 conflict with other products in the line
Slide 1 of 4
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SECTION 30.1
Product Planning, Mix,
and Development
Deleting a Product or Product Line
Obsolescence Changing interests and
technology make many products obsolete.
They are dropped in favor of newer
technologies.
Loss of Appeal As consumer tastes
change, companies drop products that no
longer appeal to popular tastes.
Slide 2 of 4
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SECTION 30.1
Product Planning, Mix,
and Development
Deleting a Product or Product Line
Conflict with Current Company Objectives
Sometimes a product does not match a company's
current objectives.
 Example: Sears sold unrelated businesses
to concentrate on retail.
Replacement with New Products A store decides
it can make more money selling a different brand, or
replaces one brand for another because another
manufacturer offers better terms.
Slide 3 of 4
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SECTION 30.1
Product Planning, Mix,
and Development
Deleting a Product or Product Line
Lack of Profit To increase profits, retailers
will handle only fast-moving and profitable
items. Product developers may drop
products when sales drop below company
objectives.
Conflict with Other Products in the Line
Sometimes increased sales of one product
can cause decreased sales of another
product.
Slide 4 of 4
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30.1 ASSESSMENT
Reviewing Key Terms and Concepts
1. What is product planning?
2. What is product mix?
3. Name four product mix strategies.
4. Identify the steps for new product
development.
5. Name one advantage and one disadvantage
to expanding a product line.
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30.1 ASSESSMENT
Thinking Critically
Suppose a company is developing a new
product, when a competitor introduces a
new product that is similar. What are some
things the company should consider in
deciding whether to proceed with the
development of its new product?
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30.1 Graphic Organizer
Developing New Products
Evaluate
Customer
Acceptance
Introduce
the
Product
Test the
Product
Screen
Ideas
Develop a
Business
Proposal
Develop a
the
Product
Generate
Ideas
Chapter 30 n Product Planning
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Marketing Essentials
End of Section 30.1
Chapter 30 n Product Planning
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