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Assistant Professor, MarketingPlease ensure all electronic devices are in “silent

mode”, “vibrate mode” or “turned off”

Anthony Francescucci

MKT 100-021WEEK 10 – PRODUCT MGMT

Welcome to

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AGENDASummary Feedback from Assignment 1

Product / Service Management

Revisit Segmentation

Mini-Case on Estimating Market Potential

Review Assignment 2 Financial Template & Any Questions

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ASSIGNMENT 1

Summary Feedback

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AREAS THAT YOU DID WELL• Discussing implications for your strengths,

weaknesses, opportunities and threats

• SWOT tables and Prioritization tables– points were under the appropriate headings

• Recommendation sections were well done for the most part – good overview of your SWOT analysis which supported

your decision to offer the internet-based video streaming service or not

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AREAS TO IMPROVE UPON• RESEARCH, RESEARCH, RESEARCH to support your claims (cannot be based on

your personal experience or opinion)

• When discussing your SWOT, some reports lacked clarity in specifics pertaining to the decision at hand (very general statements were made)

– Example: consumer preferences are constantly changing. You need to explain what preferences are changing and why this is relevant to your decision

• Always remember your executive summary should provide the reader a thorough overview of your entire report. In this section there was not enough detail of your SWOT analysis.

• APA Works Cited is ALWAYS double-spaced, with hanging lines indented, in alphabetical order. In-text citations are cited as (author, year). Not using footnotes or numbers.

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PRODUCT DEVELOPMENT

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Profit

Customer

Product

INTRODUCTIONSuperior product innovation leads to features that better fit customer segment benefits and increase shareholder value. The product development process must produce the innovations that drive profit, shareholder value, customer value, brand reputation and equity.

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Idea Generation and Concept Development

Copying and improving competitors’

innovation

New technology from pure research

New ideas from consumers

Copying innovations in foreign markets

New ideas from the channel

Existing specialized industrial product

Design simplification of existing product

New ideas from employees

Incorporation of supplier’s innovation

Lithium batteries in watches

Using baking soda as a deodorizer

Diet Pepsi

DuPont’s invention of nylon

Lite beerTV programs

Doctors recommending aspirin to prevent heart attacks

Soft soap, microwave ovens

IBM Personal computer

Sources of Innovations

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PRODUCT MANAGEMENT

Characteristics & classifications

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PRODUCT

More than tangible offering;anything that can be offered

to a market to satisfy a want or need.

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PRODUCT CLASSIFICATIONS

Classifications

Tangible

Nondurable goods

Durable goods

Intangible

Services

Use

Consumer Industrial

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Classifications

Tangible

Nondurable goods

Durable goods

Intangible

Services

Use

Consumer Industrial

• Non-durable• Goods normally consumed in one or a few uses.

Consumed quickly & purchased frequently• Durable

• Normally survive many uses

Tangible (Durability)

• Services• Are intangible, inseparable, variable & perishable

Intangible

PRODUCT CLASSIFICATIONS

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PRODUCT CLASSIFICATION

Classifications

Use

Consumer-Goods

Classification

ConvenienceGoods

ShoppingGoods

Specialty Goods

UnsoughtGoods

Industrial-Goods

Classification

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Classifications

Use

Consumer-Goods

Classification

ConvenienceGoods

ShoppingGoods

Specialty Goods

UnsoughtGoods

Industrial-Goods

Classification

• Purchase frequently, immediately, and with a minimum of effort

Convenience Goods

• Goods that are compared on suitability, quality, price and style

Shopping Goods

• Have unique characteristics or brand identification which sufficient buyers are willing to make a special purchasing effort and do not require comparison

Specialty Goods

• Those the consumer does not know about or does not normally think of buying

Unsought Goods

PRODUCT CLASSIFICATION

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PRODUCT CLASSIFICATIONS CONT'DClassifications

Use

Consumer-Goods Classification

Industrial-GoodsClassification

Materials& Parts Capital Items

MaintenanceRepairs &Operating

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Classifications

Use

Consumer-GoodsClassification

Industrial-GoodsClassification

Materials& Parts Capital Items

MaintenanceRepairs &Operating

• Goods that enter the manufacturer’s product completely. They could be raw materials or manufactured parts.

Materials & Parts

• Are long-lasting goods that facilitate developing or managing the finished product

Capital Items

• Are short-term goods and services that facilitate developing or managing the finished products

Maintenance, Repair & Operating Supplies

PRODUCT CLASSIFICATIONS CONT'D

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DIFFERENTIATION

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PRODUCT DIFFERENTIATION

• Product form• Features• Customization• Performance• Conformance• Durability• Reliability• Reparability• Style

Product

• Ordering ease• Delivery• Installation• Maintenance• Returns

Service

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PRODUCT-LINE DECISIONS

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Detergents Toothpaste Bar Soap Disposable Diapers

Paper products

Ivory Snow Gleem Ivory Pampers Charmin

Dreft Crest Camay Luvs Puffs

Tide Zest Bounty

Cheer Safeguard

Dash Oil of Olay

Bold

Gain

Era

PRODUCT MIXProduct Mix

Width

Prod

uct M

ix L

engt

h

• Refers to how many different product lines the company carries in their product mix

Product Mix

Width• Refers to the total number of items in the product

mixProduct

Mix Length

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PRODUCT –LINE LENGTH

• when a company lengthens its product line beyond its current range of productsLine Stretching

• when a company lengthens its product line within its present range of products.Line Filling

• when a company focuses on existing products by improving, featuring, or eliminating certain product lines.

Line Modernization,

Featuring & Pruning

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SERVICES

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SERVICE

Any act of performance that oneparty can offer another that is

essentially intangible and does notresult in the ownership of anything;

its production may or may notbe tied to a physical product.

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CONTINUUM OF SERVICE / PRODUCT EVALUATION

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HIGH EXPERIENCE & CREDENCE QUALITIES

Consumer generally

Rely on word of mouth

Rely on price, personnel & physical cues when judging quality

Highly loyal to service providers who satisfy them

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Perishability

Intangibility

Inseparability

Variability

DISTINCTIVE CHARACTERISTICS OF SERVICES

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TANGIBILIZING THE INTANGIBLE

Place

People

Equipment

Communication material

Symbols

Price

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HOW TO REDUCE VARIABILITY

Invest in good hiring and training procedures

Monitor customer satisfaction

Standardize the service-performance process

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HOW TO REDUCE PERISHABILITY

Demand sideDifferential pricing

Nonpeak demand

Complementary services

Reservation systems

Supply sidePart-time employees

Peak-time efficiency

Increased consumer participation

Shared services

Facilities for future expansion

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ANY QUESTIONS

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LET’S REVISIT SEGMENTATION

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WHAT ARE SOME POTENTIAL SEGMENTS FOR IPAD ?

Consumers who have

a need for an entertainment

device

an interest in gaming devices

a need to be more

productive

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LET’S FOCUS IN ON ENTERTAINMENT SEGMENT

Segment Characteristics

GeographicRegion, City or Metro side Density, Climate, province, country

DemographicAge, cohort generation, gender, family size, life-stage, education, income, occupation, nationality, ethnicity, tribal identity, family identity, religion, political party membership, nationality, social class.

PsychographicLife-style, passions, interests, hobbies, personality, sociability, social class, values.

BehavioralProduct usage rate, brand loyalty, product benefits sought, usage occasion characteristics, user status, buyer’s readiness to purchase, buy attitudes.

Entertainment Users

DemographicsYounger (14 – 35 yrs old)

Middle Income $40K+

PsychographicTechnologically savvy

BehavioralCurrent iPhone users

Remember to include sources to support your claims re: characteristics

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SEGMENT POTENTIAL

EcoSpoutCase

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HOW MIGHT WE SEGMENT THE MARKET FOR ECO-SPOUT ?

People who have a need for;

a watering can to water their plants

an all-purpose funnel

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LET’S FOCUS IN ON HOUSEHOLD PLANT SEGMENT

Segment Characteristics

GeographicRegion, City or Metro side Density, Climate, province, country

DemographicAge, cohort generation, gender, family size, life-stage, education, income, occupation, nationality, ethnicity, tribal identity, family identity, religion, political party membership, nationality, social class.

PsychographicLife-style, passions, interests, hobbies, personality, sociability, social class, values.

BehavioralProduct usage rate, brand loyalty, product benefits sought, usage occasion characteristics, user status, buyer’s readiness to purchase, buy attitudes.

Household Plant User

Demographics U.S. Households

PsychographicMaintain Household Plants

BehavioralUse a dedicated watering can

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TARGET PROFIT FEASIBILITY ANALYSIS PROCESS

•Estimate size of target market in annual units or dollars soldStep 1:

•Determine how much revenue or # of units are required to either Break-even, or achieve desired ROMI. Step 2:

•Assess the likelihood of attaining the required sales and share needed to achieve the target break-even (including target profit) or desired ROMI. Step 3:

There are about 100 million private dwellings in the U.S. market and from Industry surveys, 80% have at least one indoor plant. Most have several. They need to be watered.

About 60% use anything at hand to water the plants (our estimate). The rest use some sort of dedicated watering can.

We estimate, on average, a watering can lasts about 16 years

ESTIMATE THE SEGMENT SIZE

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# of Household

s with plants that

use dedicated watering

can

# of Households

% with Plant

s

% use dedica

ted watering can

100 Million Households 80% 40%32 Million

Households

32 Million Households would by 1 watering can every 16 years

2 Million watering cans sold every year

Only reach 50% of households – Available market is 1 Million watering canshttp://www.nationalgardenmonth.org/index.php?page=storyline-houseplants

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LET’S WORK WITH TARGET BREAK-EVEN

Break-Even

Volume

FixedCosts

Contribution

Margin / Unit

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WHAT DO WE KNOW FROM THE CASE?

•$71,000Total Fixed Costs

•$0.60Total Variable Costs/unit

•$1.80Average Retail Selling Price

•50%Retail Margin

•20%Target Profit

Is there a profitable market segment to target for this product?

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WHOLESALE REVENUE PER UNIT

•$1.80Retail Price

•50% ($1.80 X .5 = $0.90)Retail Margin

•$0.90 ($1.80 - $0.90 = $0.90)Retail Costs

•$0.90Wholesale Revenue/Unit

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Target Profit

DollarsFixed Cost (Target

Profit %)20%

TargetBreak-Even

Volume

Fixed Cost

+ Target Profit

Contribution

Margin / Unit

$71,000+

$14,200= $85,200

$14,200 $71,000

$0.90 -

$0.60= $0.30

284,000units

TARGET VOLUME TO ACHIEVE PROFIT

Break-Even

Volume

FixedCosts

Contribution Margin

/ Unit

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LIKELIHOOD OF ATTAINING TARGET VOLUME

•2,000,000 unitsTotal Market•1,000,000 unitsAccessible Market

•284,000 unitsTarget Volume

•14.2% (284K ÷ 2,000K × 100)Share of Total Market

•28.4% (284K ÷ 1,000K × 100)Share of Accessible Market

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% of shoppers who find price acceptable

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$1.00 $1.50 $2.00 $2.50

Price

% o

f S

ho

pp

ers

ESTIMATED LIKELY DEMAND

• 28.4 %Share of Accessible Market

• 50%% of

Shopper’s who find

price acceptable

at $1.80

• YesIs it a

realistic profit

target?

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ASSIGNMENT 2

Financial Template

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FINAN

CIAL ANALYSIS TEM

PLATE

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ANY QUESTIONS ABOUT THE ASSIGNMENT

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BEFORE YOU LEAVE TODAY

name cards

Front of the Class

Hand In:

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SEE YOU NEXT WEEK