Download Developing Successful Products

Chapter 10
• Product – anything tangible offered to a market by a business
to satisfy needs.
• Business people often see their products as the first part of the definition,
anything offered to a market, the tangible product.
• Consumers are concerned about their needs, and they view products as
ways to satisfy those needs.
• More than a physical product.
• Consumer feel that physical characteristics such as being durable,
attractive, and safe are important.
• The product also must be useful to the consumer and meet the consumer’s
needs.
• Business people make a mistake when they don’t take consumer needs
seriously, or feel they are so obvious that the consumer doesn’t consider
them when making a decision.
• Consumers know best.
• A mistake of some business people is believing that they are better able
than consumers to define the types of needs their products satisfy.
• Teenage market is often misunderstood.
• Another mistaken approach is to believe that products sold by a business
will satisfy many different people.
• Customer needs can change, and different consumer groups have
unique needs and experiences.
• The failure rate for new products is very high and very
expensive.
• On average, five of every ten new product ideas will not be successful.
• Companies can spend up to millions producing a product, so their
successful products must be profitable enough to cover those that are not
successful.
• Economic studies and consumer behavior indicate that products will be
successful if they meet consumer needs better than the other choices.
• Companies should be able to reduce the rate of product failure by
improving their understanding of consumer needs and competition.
• A company that believes in the marketing concept uses the
needs of customers as the primary focus during planning,
production, distribution, and promotion of a product or service.
• Marketers should not be in the position of having to sell
products that do not meet customer needs.
• Marketers should be actively involved with others in the business
in design and development of new products.
• Marketing is the eyes, ears and mouth of the customer in a
business because it is the direct link between the business and its
customers.
• Marketers work with customers every day, whether in selling,
promotion, product distribution, marketing research, or the many
other marketing activities that occur in business.
• Marketers must represent the consumer in the business as
products are designed and developed.
• Gather Information
• Gathering and studying market information and using the results to assist
in product planning keeps the focus on consumer needs and competition
rather than on the views of those involved in planning.
• Information can be collected from a variety of sources:
• Salespeople who work with customers and see competition.
• Sales data helps determine what items are selling well and what are
not.
• Identify areas of consumer complaints and product returns.
• Marketers discuss the information they collect to provide information on
product changes and improvements.
• Will often develop a marketing information system to help collect, store
and analyze information.
• Design Strategies
• A new product is developed to meet company objectives like increasing a
share in a current market or enter a new market.
• Marketers participate in developing an effective strategy by identifying
target markets, determining company strengths and weaknesses, and
evaluating existing and potential competitors.
• They use this information to propose alternative marketing mixes.
• Conduct Market Tests
• Most companies conduct tests to determine if the new product will be
successful as a way to reduce product failures and avoid spending money on
products that will not be successful.
• Expensive to conduct tests, and businesses have to be careful because
competitors may try to sway results.
• Companies are always looking for new ways to conduct tests, and now
computer programs allow companies to simulate the marketing of products
and determine expected levels of sales and profits.
• An important marketing function is product/service planningassisting in the design and development of products and
services that will meet the needs of prospective customers.
• Assisting meaning that marketers work cooperatively with others in
product development.
• Meet the needs meaning that the products are designed to satisfy
customers.
• Businesses have many choices in the development of new
products.
• Toothbrush
• Look at features like length of bristles and handle on brush.
• Compact toothbrushes for packing, disposable with toothpaste on them,
electric toothbrushes.
• Offering a guarantee is another way to differentiate products.
• Companies will get testimonials or recommendations from a professional
group such as the ADA.
• The toothbrush example demonstrates that every product can
be complex and unique, and marketers have to find a way to
make their product stand out from the rest.
• Basic Product
• The most important part of the product is its basic physical product and
consumers should be able to easily identify the important need to which
the product responds and how to use it.
• Enhanced Product
• Consumers are usually trying to satisfy several needs when they make a
purchase, so businesses enhance their basic products to meet those needs.
• Enhanced products make is possible for companies to satisfy several
target markets with one basic product.
• Some customers will view the enhancements positively and some
negatively.
• Different combinations of features, options, and even brand names are
developed with the needs of one target market in mind.
• Extended Product
• Customer satisfaction can be improved if the business offers services,
guarantees, information of effective use of the product, and even
additional products that improve the use of the primary product.
• Services are an effective way to meet additional customer needs beyond
those directly related to the use of the product.
• Suggesting additional products that should be purchased to enhance the
use of the new purchase is often an important method of improving
customer satisfaction.
• Product Line – a group of similar products with slight variations in the
product mix to satisfy different needs in the market.
• As companies add items to their product line, they usually increase then
number of potential customers and the satisfaction of individual consumers.
• This increases costs is distribution, inventory control and other related
marketing activities.
• Also needs more display space and retailers have to decide if they are
going to display all products in a line or share the area with competitors.
• Variation in Quantity
• One of easiest ways to expand from one product into several is to vary
the product size.
• Variation in Quality
• Consumers who use the products infrequently may not need the best
possible quality and would prefer to save money in exchange for
accepting a slightly lower quality.
• Product Assortments – the complete set of all products a
business offers to its market.
• Stores offer an assortment of products in one category for the customer to
choose from.
• Packaging
• The package serves the dual purpose of protection and promotion, and
can sometimes improve the use of the product.
• Ease of use – manufacturers must carefully consider how customers use a
product.
• Safety – safety and protection are important concerns when planning the
packaging of products.
• Products used by children need to have safe packaging.
• Packaging continued…
• Attraction – the promotional value of packaging is important because an
attractive package that clearly shows the use of the product.
• Handling – packaging can also be helpful in the display and security of
products.
• Environment – manufactures are increasingly using recycled materials for
packaging and developing materials that are biodegradable.
• Brand Development
• The brand name of products can be very important to consumers as they
make purchase decisions.
• Brand-a name, symbol, word or design that identifies a product, service,
or company.
• Important because it provides a unique identification for the company
and its offerings.
• Brand Development continued…
• Trademark-the legal protection of the words or symbols for use by a
company.
• Business people know that brand recognition resulting from advertising
often increases a product’s sales.
• Positive or negative experience with a brand will influence your future
purchases.
• The goal of business in using branding is to gain customer recognition of
the brand in order to increase the likelihood of a sale.
• See figure 10-1 on pg 289
• Family brand-groups of products that carry an identical brand (Kellogg’s).
• Licensed brand-well known name or symbol established by one company
and sold for use by another company to promote its products.
• Consumer Markets – individuals or socially related groups who
purchase products for personal consumption.
• You make purchase decisions on the basis of the satisfaction you receive from
using the product.
• Direct Demand – the quantity of a product or service needed to meet
the needs of the consumer.
• To satisfy direct demand, business people must be aware of
consumer’s needs and how they choose products to satisfy those needs
(consumer purchase classification system).
• Based on two factors:
• The importance of the purchase to the consumer.
• The willingness of the consumer to shop and compare products before
making the purchase.
• Marketers develop more effective products when they understand how
consumers shop for them.
• Business market – companies and organizations that purchase
products for the operation of a business or a completion of a
business activity.
• Make purchase decisions based on what is needed to
effectively operate the business, to meet the needs of
employees and customers, and to produce the products and
services of the business.
• Derived demand – the quantity of a product or service needed
by a business in order to operate at a level that will meet the
demand of its customers.
• Capital Equipment
• Includes a businesses land, buildings, and major pieces of equipment.
• Usually most expensive and most important products purchased and
include items such as:
• Office buildings
• Commercial airplanes
• Sophisticated computer equipment
• Will often be custom designed to meet the needs of the business.
• Businesses may have to purchase these items using long term loans or
lease the equipment.
• Operating Equipment
• Smaller, less-expensive equipment used in the operation of the business or in
the production and sale of products and services.
• Makes production or operations more efficient or effective and can include
items such as:
• Tools
• Small machines
• Furniture
• Often standard and will need to be replaced from time to time.
• Supplies
• The products and materials consumed in the operation of the business.
• Available from many suppliers and can include:
• Paper, pencils, paper clips
• Cleaning supplies
• Fuel, electricity, package materials
• Raw Materials
• Unprocessed products used as basic materials for the products to be
produced (grain for cereal).
• Purchasers need to have an adequate supply and standardized quality in
order to maintain a planned level and quality of production.
• Need to watch costs and businesses will often sign contracts with suppliers
to ensure they always have the supply they need at the right cost.
• Component Parts
• Parts that have been either partially or totally processed by another
company (computer chip for a computer).
• Can be designed for a particular company or standardized.
• Like raw materials, businesses need to make sure they are getting the
supply they need at reasonable cost.
• Knowing whether the customer is a final consumer or a business
consumer determines whether the product is being developed to
meet a direct demand or a derived demand.
• Products treated as convenience goods require different planning from
those treated as specialty goods.
• For business customers, the type of product and its use are important
factors to consider when planning products.
• Some products will be purchased by consumers and business markets.
• Marketers need to understand the differences in purchases
between the two types of markets in order to develop effective
products and marketing mixes for each.
• A new product must be entirely new or changed in an important
and noticeable way.
• Companies will promote products as new or improved, but it is
not always easy to see what is new or better about the product.
• Because some companies misuse the term “new” for products,
the Federal Trade Commission regulates how and when the term
new can be used.
• A company can call something “new” for only six months after the
introduction or change of a product.
• A new use for a product can be discovered, leading to new
markets.
• Companies use a very careful process to identify and develop
new products.
• The process is used to screen out products that are not likely to
be successful before too much money is spent for productions
and marketing.
• The process assures that the products meet an important market
need, can be produced well and at a reasonable prices, and
will be competitive with other products in the market.
• Idea Development
• The most difficult step in new product development.
• Many companies have consumer panels that meet regularly to discuss
ideas for new products.
• Developing new product ideas can be a very creative process and tools
such as brainstorming, creative thinking exercises, and problem solving are
used to identify product ideas for testing.
• Idea Screening
• Once a number of ideas has been identified, the second step is to
carefully screen them to select those that have the greatest chance for
success.
• See pg 299 for list of criteria that businesses follow.
• Some criteria is not straightforward, like companies do not want to
compete with themselves, want to move to new markets, financial costs.
• Strategy Development
• The business creates and tests a sample marketing strategy as a first step in
developing a business proposal.
• Research is done to clearly identify an appropriate target market and ensure
that customers exist with the need and money for the product.
• Alternative marketing mixes are planned for product, distribution, price and
promotion.
• If no appropriate mix is found, the product idea would be dropped.
• Financial Analysis
• Costs of production and marketing, sales projections for the target market,
and resulting profits will be carefully calculated.
• Companies use several models to determine the best and worst case
scenarios.
• The results of the analysis are matched against company goals and profit
objectives.
• Product Development and Testing
• Manufacturer – designs the production process, obtaining the needed
equipment and materials, and training personnel.
• Retailer – identifying a producer or manufacturer to supply the products
and negotiating a contract for the production.
• Sometimes models or prototypes are developed to test quality and cost
before starting a full scale operation on expensive or risky products.
• Market tests can also be conducted to a small segment of the target
market to determine if it will be successful, and if it is not, the company
can make changes or pull the product before a large amount of money is
spent.
• Product Marketing
• The last step is to fully introduce the product into the market, which needs
a lot of preparation.
• All marketing mix elements must be planned and involve wholesalers,
retailers, transportation companies, and advertising agencies.
• Production levels must be high enough to cover demand.
• Marketers must be prepared to do their responsibilities and coordinate
activities and schedules.
• It does not end here! Studies of the market must still be done, and
adjustments may need to be made as the market develops.