CHAPTER 30 NOTES PRODUCT PLANNING

Transcription

1 CHAPTER 30 NOTES PRODUCT PLANNING

2 SECTION 30.1 PRODUCT DEVELOPMENT Product Planning: involves making decisions about the features and services of a product or idea that will help sell that product. These decisions relate to packaging, labeling, branding, and product warranties Product Mix: includes all the different products that a company makes or sells. Ex. Kraft Foods, products in 5 areas; snacks, beverages, cheese, groceries, and convenience meals. Key brands: Kraft, Kool-Aid, Maxwell House, Nabisco, Oscar Mayer, and Post.

3 PRODUCT DEVELOPMENT Product Line: is a group of closely related products manufactured or sold by a business. Ex. Cereal division of Kellogg's Product Item: is a specific model, brand, or size, of a product within a product line. Ex. Kellogg s Special K, Special K Red Berries, Special K Chocolate, etc. Product Width: refers to the number of different product lines a business manufacturers or sells. Ex. A retailer sells Guess, Silver, and True Religion jeans, their width is 3. Product Depth: refers to the number of items offered within each product line. The number of sizes, colors, fabric types, and styles for each brand.

4 PRODUCT DEVELOPMENT Product Mix Strategies: a plan for determining which products a business will make or stock. To make these decisions, a business must take an objective look at sales and current trends. A product that has experienced success in the past may not continue to thrive if consumers wants and needs are changing. Developing New Products New products can add substantially to company s overall sales and boost it s market share. Often a slight variation of the original or existing product can lead to increased sales. New products account for about 35 percent of total sales for major consumer and industrial goods companies. They can also help a company s image by providing it with a reputation as an innovator and leader with its customers.

5 PRODUCT DEVELOPMENT Product Mix Strategies Developing New Products New product development generally involves 7 key steps: Generating Ideas Screening ideas Developing a business proposal Developing the product Testing the product Introducing the product Evaluating customer acceptance

6 PRODUCT DEVELOPMENT Product Mix Strategies Developing Existing Products Companies constantly review their product mix to expand or modify product lines. They do this in order to build on an already established image, to appeal to new markets and to increase sales and profits. Advantage: Companies that have successful product lines often add products to those lines to take advantage of customers positive attitude toward the brand name. Disadvantage: Adding new products to a company s product mix is costly.

7 PRODUCT DEVELOPMENT Two ways of developing existing products are Line Extensions: intended to be a different product that appeals to somewhat different needs of consumers. Ex. Tylenol s varieties; Cold, allergy/sinus, flu, etc. They are easy to market because customers are already familiar with the original products on which the extension is based. Product Modifications: is an alteration in a company s existing product. This is a relatively quick and easy to add new products to a company s product line. Old product phased out Could also be a redesigned package Now, Product development worksheet

8 PRODUCT DEVELOPMENT Deleting a Product or Product Line Reasons to drop a product or product line: Obsolescence Loss of Appeal Changes in Company Objectives Replacement with New Products Lack of Profit Conflict with Other Products in the Line.

9 SECTION 30.2 SUSTAINING PRODUCT SALES The Product Life Cycle: represents the stages that a product goes through during its life. Managing during the Introduction Stage The focus is on the promotion and production. The major goal is to draw the customer s attention to the new product. The company is working to build sales by increasing product awareness. Costs are high during this stage, so it s the least profitable.

10 SUSTAINING PRODUCT SALES The Product Life Cycle Managing during the Growth Stage The product is now enjoying success as shown by increased sales and profits. Advertising is focused on consumer satisfaction, rather than new product benefits. Company may have to introduce new models or make modifications to keep sales up.

11 SUSTAINING PRODUCT SALES The Product Life Cycle Managing during the Maturity Stage Sales level off or slow down. The product may have more competition or everyone owns one. More marketing dollars are used to fight off the competition causing advertising prices climb. Decisions must be made about the future of the product.

12 SUSTAINING PRODUCT SALES The Product Life Cycle Managing during the Decline Stage Sales fall Profits could be smaller than the costs. Decisions must be made about the future of the product Sell or License the Product Recommit to the Product Line Discount the Product Regionalize the Product (sell only where strong customer loyalty) Modernize or Alter the Product Offering

13 SUSTAINING PRODUCT SALES Product Positioning: refers to the efforts a business makes to identify, place, and sell its products in the marketplace The focus is the image that a product projects. The goal is to set the product apart from the competition. Ways to position a company s products: Price and Quality Features and Benefits Relation to the Competition Relation to Other Products in a Line

14 SUSTAINING PRODUCT SALES Category Management: is a process that involves managing product categories as individual business units. Category manager: is responsible for all the brands for one generic product category, such as foods, beverages, or health and beauty. They are responsible for the profits and losses of the product mix and product lines in the category.

15 ASSIGNMENT With 1 partner, generate a list of 5 products. Decide how the product is positioned: price and quality, features and benefits, relation to competition, or in relation to other products in a line. Write down the 5 products and your answers. Present answers when everyone is completed.