Marketing Essentials

Chapter 30 Product Planning 1

Marketing EssentialsMarketing Essentials

Chapter 30 Product Planning

Section 30.1 Product Planning, Mix, and Development


SECTION 30.1SECTION 30.1

What You'll LearnWhat You'll Learn

Product Planning, Mix, and DevelopmentProduct Planning, Mix, and Development

The nature and scope of product planning

The concept of product mix

The different product mix strategies

The steps in new product development


SECTION 30.1SECTION 30.1 Product Planning, Mix, and DevelopmentProduct Planning, Mix, and Development

Why It's ImportantWhy It's Important

Product planning allows a business to make or sell products that are wanted by customers. Product planning is also used to design appropriate marketing programs that help create increased sales and profit opportunities.



Key TermsKey Terms

product planning

product mix

product line

product item

product width

product depth

product modification



A product is anything a person receives in an exchange—a tangible item (car), a service (haircut), an idea (a good education), or a combination of all of these concepts. Product planning involves making decisions about features needed to sell a business's products, services, or ideas.

Product Planning



Product Mix

Product mix includes all the different products that a company makes or sells.

A large manufacturer may have hundreds of products in its product mix.

Retail stores must plan their product mix carefully because they cannot offer all of the products that customers may want.



Product Items and Lines

A product line is a group of closely related products manufactured and/or sold by a business.

A product item is a specific model, brand, or size of a product within a product line.



Product Width and Product Depth

Product width refers to the number of different product lines a business manufactures or sells.

Product depth refers to the number of product items offered within each product line.



The width and depth of product lines define product mix. What does product depth tell you about the importance of a given product line? Why do you think a company would choose to produce so many different razors?

The Concept of Product Mix

Width of the Product Mix

MACH 3SensorTrac IIAtraSwivelDouble-EdgeLady GilletteSuper SpeedTwin InjectorTechmatic

SeriesAdornToniRight GuardSilkienceSoft and DriFoamyDry LookDry IdeaBrush Plus

Paper mateFlair

CricketS.T. Dupont

Blades andRazors Toiletries

WritingInstruments Lighters



A product mix strategy is the plan for how the business determines which products it will make or stock. Businesses will either develop a new product or expand an existing product to add to their mix.

Product Mix Strategies



Developing New Products

New products can add substantially to a company’s overall sales and boost its market share. New products can:

make a company look innovative

increase profits because they are generally priced 10 to 15 percent above older items

become a major part of a product line

Slide 1 of 2



New product development generally involvesseven key steps:

1. Generating ideas

2. Screening ideas

3. Developing a business proposal

4. Developing the product

5. Testing the product

6. Introducing the product (commercialization)

7. Evaluating customer acceptance


Slide 2 of 2



New product ideas come from a variety of sources:

customers

competitors

channel members

company employees

research and development departments

Generating Ideas



Ideas for new products are screened and evaluated, and matched against the company's overall objectives to see if they fit. Some ideas are eliminated. The best ideas are put through further evaluation. Finally, one or two ideas are selected for development.

Screening Ideas



A product idea must be considered in regard to its potential for profit. A business proposal is developed to evaluate the size of the market, potential sales, production requirements, costs, profit potential, technological trends, and risk.

Developing a Business Proposal



During product development, a prototype (a model of the product) is made, and marketers develop a marketing strategy. The prototype is tested, and adjustments are made to improve the final product.

Developing the Product



Newly developed products are usuallytested to obtain customers' responses. Common strategies are:

test marketing in a certain geographic area

evaluation by a focus group

Testing the Product



If customer response is favorable, the product is introduced into the marketplace. This stage is called commercialization. The costs of introducing a new product often are quite high. At this stage, the company will need to:

advertise the product

create or revise a distribution network

train its sales force

Introducing the Product



Evaluating Customer Acceptance

After the product has been introduced, marketers track new product performance to evaluate customer acceptance of the product and the marketing strategies used to introduce the product.



Developing Existing Products

In order to build on an established image, appeal to new markets, and increase sales and profits, companies can either:

expand an existing product line or

modify an existing product

Slide 1 of 3




Line Extensions Companies can expand product offerings by adding new product lines, items, or services.

Example: Tylenol expanded to Tylenol Flu, Tylenol Cold, and Tylenol Allergy/Sinus

Extensions can also be new lines of products.

Example: Bic pens and Bic lighters

Slide 2 of 3




Product modification is an alteration in a company's existing product. Product modifications are a relatively quick and easy way to add new products to a company's product line.

Slide 3 of 3



Deleting a Product or Product Line

Sometimes companies decide that they will no longer produce or sell a particular product or perhaps even a whole product line. Some of the reasons for this are: obsolescence loss of appeal conflict with current company objectives replacement with new products lack of profit conflict with other products in the line

Slide 1 of 4




Obsolescence Changing interests and technology make many products obsolete. They are dropped in favor of newer technologies.

Loss of Appeal As consumer tastes change, companies drop products that no longer appeal to popular tastes.

Slide 2 of 4




Conflict with Current Company Objectives Sometimes a product does not match a company's current objectives.

Example: Sears sold unrelated businesses to concentrate on retail.

Replacement with New Products A store decides it can make more money selling a different brand, or replaces one brand for another because another manufacturer offers better terms.

Slide 3 of 4




Lack of Profit To increase profits, retailers will handle only fast-moving and profitable items. Product developers may drop products when sales drop below company objectives.

Conflict with Other Products in the Line Sometimes increased sales of one product can cause decreased sales of another product.

Slide 4 of 4


30.1 ASSESSMENTASSESSMENT

Reviewing Key Terms and Concepts

1. What is product planning?

2. What is product mix?

3. Name four product mix strategies.

4. Identify the steps for new product development.

5. Name one advantage and one disadvantage to expanding a product line.


30.1 ASSESSMENTASSESSMENT

Thinking Critically

Suppose a company is developing a new product, when a competitor introduces a new product that is similar. What are some things the company should consider in deciding whether to proceed with the development of its new product?


30.1 Graphic OrganizerGraphic Organizer


Generate Ideas

ScreenIdeas

Test theProduct

Introduce the

Product

Evaluate Customer Acceptance

Develop aBusinessProposal

Develop athe

Product


Marketing EssentialsMarketing Essentials

End of Section 30.1

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