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Products: Development & Distribution Class 28 Thursday 12/6/11 Developing & Distributing New Products • New Idea Screening • Product Development • Business Analysis • Test Marketing • Distribution • Commercialization [Advertising, PR, Sales promotion, Personal Selling] Types of Product Developments 1. New-to-the-market 2. New to the company 3. Improvement in an existing product 4. Extend existing product line When Is an Idea an Opportunity? Sources of New Product Ideas Entrepreneur = Creative Solicit people within the organization • • • • • Marketing Sales Research Manufacturing “Entrepreneurial” Units Outside • Customers • Competition Classifying Products • Consumer Products – Convenience products – Shopping products – Specialty products • Business Products – Raw materials – Major equipment – Accessory equipment – Component parts – Processed materials – Industrial services Product Line and Product Mix • Product Line – Closely related products that are treated as a unit because of similar marketing strategy, production, or end-use considerations • Product Mix – All of the products offered by an organization Colgate-Palmolive’s Product Mix and Product Lines Source: “Our Products,” Colgate-Palmolive (n.d.), www.colgate.com/app/Colgate/US/Corp/Products.cvsp (accessed June 5, 2004). Business Analysis Evaluate • Segment Market • Find Niche- Unmet need Assess Competition Understand Customer Needs Forecast Demand • Similar Businesses • Potential Customers • Published Industry Data Assessing Competition Industry sales growing/contracting? Major competitors? Product differ? Opportunities/threats? Recent changes/direction? Technology? Mature/new company success? Reasonable profits? When to Develop & Market a New Product Breakeven Analysis • “…total sales revenue must exactly equal all your expenses (both variable and fixed).” Breakeven Calculation Selling Price -Variable Cost per Unit Contribution Margin Fixed Cost Contribution Margin = Breakeven (Units) Risks to Product Development Trade-Offs Time Pressure Economics Development Process • “…series of activities by which a product idea is transformed into a final product.” The Product Development Process Patent Patent: “…‘right to exclude others from making, using, offering for sale, or selling’ the invention in the U.S. for 20 years.” Patent can be for a product idea or an application Website: http://www.uspto.gov Identifying Products • Branding – The process of naming and identifying products; can use a brand mark or trademark • Packaging – The external container that holds and describes the product • Labeling – The presentation of important information on a package Trademark Trademark: A symbol, word, or words legally registered or established by use as Representing a company or product. Categories of Brands • Manufacturer Brands – Kellogg’s, Ford, Sony • Private Distributor Brands – Kenmore appliances (Sears) • Generic Brands – peanut butter, dog food, kitty litter Packaging Functions • • • • Protection Economy Convenience Promotion Did You Know? While shopping, the average time a consumer looks at a package is 2.5 seconds. Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Labeling • The content of labeling, often required by law, may include: – – – – – – – Ingredients or content Nutrition facts (calories, fat, etc.) Care instructions Suggestions or use (such as recipes) The manufacturer’s address and toll-free number Web site Other useful information Distribution Strategy • Marketing Channels – Retailers (Wal-Mart, Sears) – Wholesalers (food brokers to restaurants) – E-tailers (Amazon.com) Supply Chain Management • Long-term partnerships among channel members to reduce costs, waste, and unnecessary movement through the channel to satisfy customers Physical Distribution • Physical distribution includes all the activities necessary to move products from producers to customers – – – – Inventory control Transportation Warehousing Materials handling Importance of Distribution in a Marketing Strategy • Distribution decisions are the least flexible marketing decisions – Use committed resources – Establish contractual relationships – Are bound by time The Promotion Mix • A strong promotion program results from the careful selection and blending of: – – – – Advertising Personal selling Publicity Sales promotion • Integrated marketing communications – The process of coordinating the promotion mix elements and synchronizing promotion as a unified effort