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Chapter 8

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Queen's University
COMM 131
Jacob Brower

Marketing Chapter 8: Developing and Managing Products and Services February 5, 2013 What is a Product? - Product: anything that can be offered to a market for attention, acquisition, use, or consumption that satisfies a want or need - Service: an activity, benefit, or satisfaction offered for sale that is essentially intangible and does not result in ownership Products, Services, and Experiences - Marketing-mix planning begins with building a product offering that brings value to customers - Market offerings include both tangible goods and intangible services - Pure Tangible Good: no services accompany the product (ie. toothpaste) - Pure Service: offer consists primarily of a service (ie. dentist appointment) - Companies create and manage customer experiences to differentiate their offer Organizations, People, Places, and Ideas - Organization Marketing: activities undertaken to create, maintain, or change the attitudes and behaviour of target consumers toward an organization - Person Marketing: consists of activities undertaken to create, maintain, or change attitudes or behaviours toward people - Place Marketing: activities undertaken to create, maintain, or change attitudes or behaviours toward particular places Levels of Products and Services 1. Core Customer Value - What is the customer really buying? - Define problem-solving benefits that customers seek - ie. Blackberry users seek mobility and connectivity to people and resources 2. Actual Product - Turn core benefits into a product - Develop product and service features, design, quality, level, brand, packaging - ie. The Blackberry is the product 3. Augmented Product - Offer additional customer service and benefits - ie. Blackberry provides customers with a complete solution to mobile connectivity problems Product and Service Classifications 1. Consumer Products: bought by final consumers for personal consumption Convenience Products: consumers buy frequently, immediately, and within minimum of comparison and buying effort (ie. laundry detergent) Shopping Products: the customer, in the process of selection and purchase, compares on bases such as suitability, quality, price, and style (ie. clothes) Specialty Products: has unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort (ie. Lamborghini, luxury goods) Unsought Products: customer either does not know about or knows about but does not normally think of purchasing (ie. life insurance, blood donations) 2. Industrial Products: purchased for further processing or for use in a business Materials and Parts: raw materials and manufactured materials and parts, sold directly to industrial users Capital Items: aid in the buyer’s production or operations (ie. installations, accessory equipment) Supplies and Services: convenience products of the industrial field, purchased with minimum effort or comparison New Product Development New Product Development Strategy - Acquisition: buying a whole company, a patent, or a license to produce someone else’s product - New Product Development: the development of original product improvements, product modifications, and new brands through the firm’s own product development efforts - New products bring new solutions and variety to customer’s lives and are a key source of growth for companies - Innovation is expensive and risky New Product Development Process 1. Idea Generation - Systematic search for new product ideas - Ideas come from internal sources and external sources (customers, competitors, distributors, suppliers, advertising agencies etc.) - Companies analyze customer questions and complaints to find better solutions 2. Idea Screening - Screening new product ideas to spot good ideas and drop poor ones - Executives write up new product ideas to be reviewed (describe product, proposed customer value proposition, target market, competition, pricing, etc.) - Company must answer the RWW (is it real, will we win, is it worth it) 3. Concept Development and Testing - Develop ideas into a product concept - Product Concept: detailed version of the new product idea stated in meaningful customer terms - Product concept must be developed and tested with a group of potential consumers 4. Marketing Strategy Development - Marketing Strategy Development: designing and initial marketing strategy for a new product based on the product concept - Strategy must answer questions about how, when, where, and to whom the product will be introduced - Marketing Strategy Statement  Describe target market, planned value proposition, sales, market share, and profit goals for the first few years  Outline product’s planned price, distribution, and marketing budget for the first year  Describe planned long-run sales, profit goals, and marketing mix strategy 5. Business Analysis - Evaluate the business attractiveness of the proposal - Business Analysis: a review of the sales, costs, and profit projections for new products to find out whether these factors satisfy the company objectives - Estimate minimum and maximum sales to assess the range of risk 6. Product Development - Developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering - R&D department develops and tests multiple versions of the product concept (design a prototype that satisfies excited consumers) 7. Test Marketing - Product and marketing program are tested in realistic market settings - Gives the marketer experience with marketing the product before going to the introduction stage - When costs of developing are low, or management is confident, the company may do little or no test-marketing (ie. line extensions or copies of successful competitor products) 8. Commercialization - The full-scale introduction of the new product into the market - High costs for company Managing New Product Development  Customer-Centered - Understanding of what customers need and value - Solve customer problems - Offer a compelling customer value proposition  Team-Based - Sequential Approach: one company department works individually to complete its stage of the process before passing it to the next stage - Team-Based Approach: company departments work closely in cross-functional teams, overlapping the steps in development to save time and increase effectiveness  Systematic The Product Life Cycle - Product Life Cycle (PLC): the course of a product’s sales and profits over its lifetime - Describes a product class (Gasoline-Powered Automobiles), product form (SUV) or brand (Ford Escape) - Style: basic and distinctive mode of expression (clothing – formal/casual) - Fashion: a currently accepted or popular style in a given field (business casual attire) - Fad: a temporary period of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity (eg. Crocks) 1. Product Development - Company finds and develops new product idea - Sales are zero, investment costs mount 2. Introduction - Slow sales growth as product is introduced to market - Profits negative or low, heavy promotion expenses - Few competitors - Focus on selling to customers that are most ready to buy 3. Growth - Rapid market acceptance, market expands - Increasing profits and sales, manufacturing costs fall - New competitors enter market - Introduce new product f
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