Chapter 7
INTRODUCING AND
MANAGING THE PRODUCT
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• Perspectives on “product:” manufacturer,
consumer, public
• Three levels inherent in products
• Classification systems of products; appropriate
marketing strategies
• Difference between goods and service
products
• Processes involved in product planning and
strategy formulation: determination of
objectives, identification and resolution of
factors with impact
• Eight steps in new product development
system
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• Tangible / intangible offering of a
firm that satisfies customers
• Single product, combination of
products, product-service
combination
• Generic & brand name
• Profitable / potentially profitable
• Meets the requirements of various
publics governing/influencing
society
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Kraft Foods: macaroni and cheese dinner
• Manufacturer: food product containing
certain ingredients, packaged, distributed,
priced, promoted in a unique manner; return
on investment
• Consumer: nutritious food item, quick, easy
to prepare, readily consumed by family,
especially kids
• Public e.g., Food and Drug Administration:
set of ingredients that must meet particular
minimum standards, in terms of food quality,
storage, distribution
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Core: what the consumers feel they are getting when they
purchase the product e.g., an overweight individual buying
a tread-mill
Tangible: quality level, features, brand name, styling and
packaging; helps to evaluate, choose e.g., a young guy
buying a car looks for styling, brand, same guy at middleage looks for quality, features
Augmented: host of supporting services e.g., restrooms in a
department store
Promised: implied promise, characteristic attached to the
product over time e.g., car industry rates brands by their
trade-in value
• Consumer vs.
industrial
• Goods products
(durable and
non-durables)
vs. service
products
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Convenience
Shopping
Specialty
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• Minimum amount of effort, time, planning by consumer
• Primary marketing strategy: extensive distribution
• Must be available in every conceivable outlet; easy
accessibility e.g., vending machines
• Low unit value, highly standardized, nationally advertised
• Extensive mass advertising, sales promotion e.g.,
coupons, effective packaging create high brand
awareness, recognition
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• Compare products e.g., furniture
• Wide distribution
• Retailer’s ability to differentiate:
strong brand-name e.g., Sears
Roebuck; effective merchandising;
aggressive personal selling; credit
availability
• Promotional discounting
• Slow product turnover, capital tied in
inventory
• Manufacturers strong support
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• Unique products; consumers will go to any
length to seek out and purchase them
• Price is not a principal factor affecting
sales
• Custom-made; sufficiently differentiated in
the mind of the consumer e.g., Crisco
• Specialty class: marketing activities
targeted towards achieving this
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Perspectives:
• The producer and
how they shop for the
product
• Manufacturer and
how the product is
produced and how
much it costs
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• Extractive: farm and
natural
• Manufactured:
• Semi-manufactured
• Parts
• Process machinery
• Equipment
• Supplies and service
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• Farms
products:
semi or fully
processed
• Natural:
forests, mines,
quarries
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• Demands derived from demands for
ultimate consumer goods
• Semi-manufactured e.g., crude oil
• Parts e.g., lawn mowers’ motors
• Process machinery / installations:
e.g., physical plant (boilers, elevators)
• Equipment e.g., fork lift trucks
• Supplies, services e.g., paper, soap,
office cleaning, plumbing, legal advice
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• Service products: utilities, barbers, travel
agencies; Goods: cars, food items
• Intangible: a deed vs. an object
• Simultaneous production and consumption vs.
production, storage, consumption
• Little standardization vs. consistent levels of
satisfaction
• High buyer involvement, customization vs. fixed
product
• Perishability
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The determination of product
objectives
The development of product plans to
achieve product objectives
The development of strategies
appropriate for the introduction,
management of products
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• Growth in sales
• Finding new uses for
established products
• Using excess capacity
• Maintaining / improving
market share
• Developing a full line of
products
• Expanding product’s
appeal to new market
segments
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Product Life Cycle:
• Product development: ideas are
generated, operationalized, tested
prior to commercialization
• Introduction: initial distribution and
promotion
• Growth: accepted by consumers,
trade; word-of-mouth
• Maturity: serious competition cuts
market position
• Decline: obsolete, decline in sales
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Duration of product lifecycle curve is
dependent on:
Lasting distinctiveness or market
protection: e.g., secrecy, patent
protection, time and cash needed to
develop competitive products, vs.
perishable distinctiveness
Vigorous promotional program or a
dramatic price cut may temporarily
improve sales in the decline period
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• Consistently evaluate existing
products
• Modifies where necessary
• Deletes products that no longer
contribute to the firm
• Introduces new products
• Product management: gather
necessary data, utilize a framework
to evaluate it in light of a particular
product / group of products, select
appropriate strategy, implement
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Approaches to the market:
• Product differentiation:
appeal to whole market
• Market extension:
attracting additional types
of buyers, discovering and
promoting new users
• Market segmentation:
focus on part of the market
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Issues
Key product management
decisions:
Product features
Packaging
Branding
Related services
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Form
Color
Size
Weight
Odor
Material
Tactile qualities
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• Self- service marketing
• Get consumers to notice product through
effective packaging
• Motivational research, color testing,
psychological manipulation
• Role of product: quality, safety,
distinction, affordability, convenience,
aesthetic beauty
• Design of package: color, size, texture,
location of trademark, name, product
information, promotional materials
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• Identify a product,
meaningfully advertise,
distinguish it from its
competitors
• Easier for customers to
track
• Legal protection
• Associate quality with
successful brands
• Create loyalty
• Premium pricing
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• Brand: Name, term, sign, symbol, design
• Brand names: vocalizable part of the
brand
• Brand mark: recognizable part of the
brand
• Trademark: legal protection given
because the brand is capable of exclusive
appropriation
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Branding strategies
• Manufacturer’s branding policy:
producer refuses to manufacture
merchandise under brands other than its
own
• Exclusive distributors brands: producer
does not have a brand of his own but
agrees to sell his products only to a
particular distributor and carry his brand
name (private brands)
• Mixed brand policy: elements of both
extremes
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• Warranty: limited e.g.,
VCR with 30-day
warranty; extended e.g.,
Craftsman tools division of
Sears Roebuck
• Money-back guarantees
• Credit and financing
• Delivery (e.g., furniture),
installation (e.g., home
computers), training and
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• Why need them?
• Changes in consumer tastes, the size,
characteristics of particular market
segments
• Changes in availability or cost of raw
materials, other production, marketing
components
• Proliferation of small-share brands that
reduce efficiencies in production,
marketing, servicing of existing brands
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Product modification:
• not too pricy for existing
consumers
• the consumer’s
perception of the product
to be too good
• assert what the consumer
want as improvements
• evaluate competitor’s
improvements
• evaluate improvements
developed within the
company (R&D)
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Product positioning:
• market niche - place, rank,
mental attitude, strategic
process
• attributes, price, competitors,
application, product user,
product class, services provided
Repositioning:
• Changing perception of the
market to make the product
more competitive
• Change price, tangible product,
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promotional message
• Depth: number of products
in a product line
• Width: number of separate
product lines a company
owns
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• Full-line: all conceivable product
needed and wanted by the consumer
• Limited-line: select items
• Line-extension: adding goods
related to initial product e.g., addition
of software to hardware
• Line-filling: void in the existing line
has not been filled or a new void has
developed due to competitors or
consumers; product proliferation,
brand extension, private branding
• Line-pruning: get rid off nonprofitable products
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• Product is losing money
• Drop weakest product in case of a
long product line (product line
simplification)
• Problem products absorb too
much management time,
inventory costs, promotion
expenses, decline of company
reputation
• Mixed opportunity costs
• Process of product deletion:
revival
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Defining the ‘New:’
• Consumer’s viewpoint:
degree of consumption
modification, continuous
innovations; task experience
• Firm’s viewpoint: changing
the marketing mix,
modification, differentiation,
diversification
• Federal Trade
Commission’s definition:
entirely new or changed in a
functionally significant or
substantial respect
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• Internal sources:
basic research,
applied research,
development
• External sources:
acquisition of entire
businesses to
acquisition of a single
component needed for
internal new product
development of a firm;
mergers and
acquisitions, licenses
and patents (products,
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joint venture
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 Generating new product ideas
 Screening product development ideas
 Business analysis
 Technical and marketing development
 Manufacturing planning
 Marketing planning
 Test marketing
 Commercialization
 Possible reasons for failure: technical problems, bad
timing, misunderstanding the consumer & environment,
competitor’s actions
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• Internal resources: basic
research, manufacturing,
salesperson, top
management
• External resources:
secondary sources of
information, competitors,
customers, resellers,
foreign markets
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Category appraisal:
• Points to new product opportunities
within an existing category
• to opportunities in a new adjacent
category
Objective: discover what makes the
category tick? e.g.,
• What drives consumer acceptability?
• Strengths and weaknesses?
• Opportunities to outperform existing
products?
Common techniques:
• Simple checklist
• Weighing and ranking products on a
scale of product compatibility
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• Profits
• Social responsibilities
• Projected demand: sales
of product, sales or
license of technology
developed for or
generated as a byproduct of the given
product
• Cost appraisal:
development, set-up,
operating, marketing,
management
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• Applied laboratory research:
develops exact product
specification; constructs prototypes
• Manufacturing-methods
research: best way of making the
product in commercial quantities
under normal manufacturing
conditions
• Marketing research: product
concept test, description of a
product idea that reflects core
elements of the proposed product;
consumer testing
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• Appraisal of the existing
production plant, necessary
tooling required to achieve
the most economical
production
• Compromise between
attractiveness and
economy
• Consider other areas of the
organization, what is
required of each, coordination
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• Marketing plan
• Statement of
objectives
• Fusion of product,
distribution,
promotion, pricing
into an integrated
program of
marketing action
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• Assess overall workability
of the marketing plan
• Evaluate alternative
allocations of the budget
• Determine whether a new
product introduction is
inspiring users to switch
from their previous
brands
• Estimate sales, market
share, financial
performance
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• Product testing: producer
selects sample of
consumers, provides them
incentive to try out the
product
• Test marketing:
simulations, test cities
represent national market,
consumers make the
decision themselves, pay
the money, test products
compete with existing
products in the actual
marketing environment but
on a limited basis, involves
direct and indirect costs 42for
manufacturer
• Product is ready to
go
• Lifecycle marketing
plan
• Additional
decisions about
distribution,
promotion, pricing
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