PRODUCTS AND LIFE CYCLE STRATEGIES n Products and

PRODUCTS AND LIFE CYCLE STRATEGIES n Products and n Branding product lines n New products: Development, successes and failures n The Product Life Cycle and Diffusion of Innovations MKTG 370 PRODUCT Lars Perner, Instructor 1

Product Lines vs. Product Mix n Product Line: A number of similar or related products—e. g. , n n n BIC writing utensils Boeing Commercial Aircraft (aircraft and parts) Nike shoes; Nike clothing n Product Mix: assortment of different products offered n n MKTG 370 E. g. , “KFC—we do chicken right!” (Only one product line) 3 M: Tapes, adhesives, Post-its, chemicals, computer disks, overhead projectors (things that are bonded together PRODUCT Lars Perner, Instructor 2

Reasons for Product Failure n Insignificant “Point of Difference” n Incomplete prior market and n n n MKTG 370 product definition Insufficient market attractiveness Poor execution of the marketing mix Poor product quality or customer need sensitivity Bad timing Lack of economical access to customers PRODUCT Lars Perner, Instructor 3

Stages in New Product Development Process Text, p. 279. Copyright © 2002 Mc. Graw-Hill. MKTG 370 PRODUCT Lars Perner, Instructor 4

Idea Generation n Sources of new ideas n Customer based n n n n MKTG 370 Outright suggestions Observation of customer problems and tasks Market research on processes and problems Supplier suggestions Employee suggestions R&D Breakthroughs Competitive ideas Adaptation of products seen in foreign markets PRODUCT Lars Perner, Instructor 5

Screening n Internal screening n Technical feasibility n Consistency with strategic objectives n External screening n Marketing research n Questionnaires n Conjoint analysis (determines importance of attributes) MKTG 370 PRODUCT Lars Perner, Instructor 6

Business Analysis and Development n Business analysis n Development Financial feasibility n Legal issues n Impact on sales of existing products n Financial projections n MKTG 370 PRODUCT Design n Prototypes n Refinements n Lars Perner, Instructor 7

Test Marketing and Commercialization n Test marketing n Limited regional release n May pre-test prices and positioning n Simulated test markets n Laboratory n Computer based MKTG 370 n Commercialization n Positioning n Launching product n Risks n Slotting fees n Failure fees n Withdrawal due to insufficient sales PRODUCT Lars Perner, Instructor 8

The Product Life Cycle Text, p. 295. Copyright © 2002 Mc. Graw-Hill. MKTG 370 PRODUCT Lars Perner, Instructor 9

Some PLC Stage Examples n Color TVs: Maturity n Black and white TVs: n n n MKTG 370 n Digital photography: Decline HDTV: Growth VCRs: Decline DVD players: Growth Jeans: Maturity Fast food: Growth/maturity Traditional photography: Maturity Growth n Fax machines: Maturity n Internet access (U. S. ) n n Dial-up: Mature DSL, Cable: Growth n Travel agencies: Decline n Autism education: Introduction n Cranberry juice: Revitalization PRODUCT Lars Perner, Instructor 10

The Product Life Cycle (PLC) involves ____ over time n Demand for the product n Awareness of the product n Competition in supplying the product n n Investment opportunities (Boston Consulting Group model) n Appropriate strategies Price Features Differentiation n Profitability n Alternatives available to the product MKTG 370 PRODUCT Lars Perner, Instructor 11

Dimensions of the Product Life Cycle (PLC) n Length n Tend to be increasingly short n Especially short in Japan n Diffusion among consumer segments n Shape n Effects of learning opportunities n Product level n Class (e. g. , TVs) n Form (e. g. , HDTV) MKTG 370 PRODUCT Lars Perner, Instructor 12

The International Life Cycle n Market for older technology tends to exist in less developed countries n Manufacturing of older generation technology-e. g. , Pentium I computers n Resale of capital equipment—e. g. , DC 8 aircraft, old three part canning machines n Some countries tend to be more receptive to innovation than others MKTG 370 n “Leap frogging” Going directly from old technology to the very newest, skipping intermediate step (e. g. , wireless rather than wired technology) n Shortening of product life cycles n PRODUCT Lars Perner, Instructor 13

Types of Innovations n Continuous--same product, just small improvements over time--e. g. , typical automobile/stereo system model changes n Dynamically continuous--product form changed, but function and usage are roughly similar--e. g. , jet aircraft, ball point pen, word processor n Discontinuous--entirely new product; usage approach changes (e. g. , fax) MKTG 370 PRODUCT Lars Perner, Instructor 14

Some Diffusion Examples n ATMs n Easy observability n Significant relative advantage n Credit cards n “Chicken-and-egg” problem n Jump-starting the cycle n Faded, torn jeans n Fads n Innovations do not have to be high tech MKTG 370 n Fax machines n Network economies n Rap music n Low barriers to entry n Spread to a new consumer group n Hybrid corn n n PRODUCT Trialability Imitation Lars Perner, Instructor 15

To Adopt or Not to Adopt: How Will Consumers Answer the Question? n Some causes of resistance to adoption n n MKTG 370 perceived risk--financial and social self image effort to implement and/or learn to use the product incompatibility inertia PRODUCT Lars Perner, Instructor 16

Influences on the Speed of Diffusion n Risk to expected benefit ratio (relative advantage) n Product pricing n Trialability n Switching difficulties and learning requirements/ ease of use MKTG 370 PRODUCT Lars Perner, Instructor 17

Branding n Brands n Product or product line specific brands n E. g. , Tide, De. Walt, Hayes modem n International issues n “Umbrella Brands” n 3 M n National vs. regional n National vs. international n Store brands n Trade marks and “genericide” MKTG 370 PRODUCT Branding has been traced to whiskey casks that were identified for quality. Lars Perner, Instructor 18

Brand as Category Label: A Mixed Blessing n Brand names potentially in danger n Coke (“cola drink”) n Kleenex (“facial tissue”) n Fed. Ex (“overnight express”) n Xerox (“photo copy”) n Market share benefit of descriptive brand name Distributional n Consumer “mind share” n MKTG 370 PRODUCT Lars Perner, Instructor 19

Brand Value and Image n Brand equity: Value added to product based on brand name Choice likelihood n Ability to charge higher price n Use of product as loss leader n n n Benefit in market share, temporary revenue (Coca Cola) Possible damage to long term brand image (Louis Vuitton suitcases in Japan) n Brand “personality: ” Associations with product MKTG 370 PRODUCT Lars Perner, Instructor 20

Co-branding n To take advantage of assets of both firms n Types n Distributional: n n n Egalitarian: Carl’s Jr. and Green Taco Hierarchical: Kodak as official film of Disney Parks Line filling—e. g. , airline code sharing n n MKTG 370 Ingredients: PRODUCT Cooperative: Dreyers’ ice cream with Mars M&Ms Independent: Local computer maker advertises Maxtor hard drive components Intrusive: “Intel Inside” Partial: Mc. D’s serves Coca Cola Sponsorship: Good Housekeeping seal of approval Lars Perner, Instructor 21

Branding Issues n To extend or not to extend? n Congruence--are products consistent in image to be represented by the same brand name? Coke and Diet Coke n Miller vs. Miller Light Beer n Perception of ability to make product well n n Extention should not be exploitative (e. g. , Heinecken Popcorn) n Order of entry: First manufacturer of new to market product should not extend MKTG 370 PRODUCT Lars Perner, Instructor 22