0 630 10 Unit Overview INTRODUCE THE UNIT Unit 10 discusses the decisions a busi- ness makes in the production and sale of its products. Chapter 30 shows how businesses plan what products to produce and sell. Chapter 31 introduces the nature and scope of branding in product planning. Chapter 32 discusses the various types of warranties and credit offerings provided by businesses to support products. BUILD BACKGROUND Ask students to brainstorm why busi- nesses need to know how to introduce new products while keeping other products successful in the marketplace. Have students share their first impres- sions of the ad on this page. Ask them to discuss what kind of product informa- tion is given in this ad and to describe how the information is conveyed (for example, through visual elements). Then ask students to decide which components of the ad are most effective at conveying product features and quality. ANALYZE THE AD Ask students to think of a manufac- turer they prefer, such as a clothing company, music label, or auto manu- facturer. Have them write an essay describing at least three reasons why they are loyal to it. Ask students to keep and review this document as they study Unit 10. Presenting Products Have chapter members complete a 15-minute sales presentation for an item to be sold to a com- pany for resale. Students should stress the product features, brands, warranties, packaging, label- ing, and related extended product features. Refer to your guidelines or the guidelines developed by the National DECA Delta Epsilon Chi division for the Sales Representation Event. Assessment Guidelines Prepare a rubric for evaluation that includes the guidelines devel- oped by National DECA for the Sales Representation Event, or prepare your own guidelines that include the effectiveness and thoroughness of the presentation. Enrichment Assign and review Unit 10 activities in the Competitive Events Workbook. In this unit you will find • Chapter 30 Product Planning • Chapter 31 Branding, Packaging, and Labeling • Chapter 32 Extended Product Features Celestial Seasonings makes herbal and traditional teas, packaged in distinctive, colorful boxes made of recycled paper. The packaging uses as little paper and materials as possible to save on waste. How does the ad image reflect this company’s commitment to the environment? ANALYZE THE AD 630
Transcript
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630
10Unit Overview
INTRODUCE THE UNITUnit 10 discusses the decisions a busi-ness makes in the production and sale of its products.Chapter 30 shows how businesses plan what products to produce and sell.Chapter 31 introduces the nature and scope of branding in product planning.Chapter 32 discusses the various types of warranties and credit offerings provided by businesses to support products.
BUILD BACKGROUNDAsk students to brainstorm why busi-nesses need to know how to introduce new products while keeping other products successful in the marketplace.
Have students share their fi rst impres-sions of the ad on this page. Ask them to discuss what kind of product informa-tion is given in this ad and to describe how the information is conveyed (for example, through visual elements). Then ask students to decide which components of the ad are most effective at conveying product features and quality.
A N A LY Z E T H E A D
Ask students to think of a manufac-turer they prefer, such as a clothing company, music label, or auto manu-facturer. Have them write an essay describing at least three reasons why they are loyal to it. Ask students to keep and review this document as they study Unit 10.
Presenting Products
Have chapter members complete a 15-minute sales presentation for an item to be sold to a com-pany for resale. Students should stress the product features, brands, warranties, packaging, label-ing, and related extended product features. Refer to your guidelines or the guidelines developed by the National DECA Delta Epsilon Chi division for the Sales Representation Event.
Assessment Guidelines Prepare a rubric for evaluation that includes the guidelines devel-oped by National DECA for the Sales Representation Event, or prepare your own guidelines that include the effectiveness and thoroughness of the presentation.
Enrichment Assign and review Unit 10 activities in the Competitive Events Workbook.
In this unit you will find
• Chapter 30 Product Planning
• Chapter 31 Branding, Packaging, and Labeling
• Chapter 32 Extended Product Features
Celestial Seasonings makes herbal and traditional teas, packaged in distinctive, colorful boxes made of recycled paper. The packaging uses as little paper and materials as possible to save on waste. How does the ad image reflect this company’s commitment to the environment?
A N A LY Z E T H E A D
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10Unit ObjectivesAfter completing this unit, students should be able to: • Explain how businesses plan what products to produce and sell and how they
position and manage these products• Explain the nature and scope of product planning, product mix, and product
development• Explain the concept of a product life cycle• Identify strategies to position products in various life cycles• Explain the nature and scope of branding, packaging, and labeling in product
planning• Identify the importance of branding, branding elements, and branding
strategies to product/service management• Explain the importance of warranties and credit to product planning• Discuss the importance of warranties as extended product features
OUT OF TIME?If you cannot cover all unit chapters, go to Unit 10 in your Fast File Teacher Resources booklet and fi nd the Chapter Summaries for Chapters 30, 31 and 32.
KEY TO LEVELED LEARNING ACTIVITIESL1 Strategies should be within the ability range of all
students. Often full class participation is required.L2 Strategies are for average to above-average students
or for small groups. Some teacher direction is necessary.
L3 Strategies are designed for students able and willing to work independently. Minimal teacher direction is necessary.
KEY TO RESOURCE ICONS Print Material
CD or DVD
Online Learning Center through glencoe.com
KEY TO LETTER ICONS
Reading Strategy activities help you teach reading skills and vocabulary.
Critical Thinking strategies help students apply and extend what they have learned.
Skill Practice strategies help students practice historical analysis and geographical skills.
Writing Support activities provide writing opportunities to help students comprehend the text.
Develop Concepts activities use various strategies to help teachers gauge and plan for students’ concept development.
Universal Access activities provide differentiated instruction for English language learners, and suggestions for teaching various types of learners.
No Child Left Behind activities help students practice and improve their abilities in academic subjects.
Chapter 30 From Unit 10 Fast File BookletLesson PlansChapter SummariesReproducible MastersReproducible Tests
Print AncillariesStudent Activity Workbook, Chapter 30Marketing Math Workbook, Chapter 30BusinessWeek Reader with Case Studies, Chapter 30Competitive Events Workbook, Unit 10Marketing Research Project WorkbookSchool-to-Career Activity Workbook
Interactive Chalkboard classroom presentations, Chapter 30 Online Learning Center through glencoe.com
Enrichment Resources at the Online Learning Center through glencoe.com
Online Student Edition, Chapter 30TeacherWorksTM Plus ExamView® Assessment Suite, Chapter 30 Virtual Business
Chapter 31 From Unit 10 Fast File BookletLesson PlansChapter SummariesReproducible MastersReproducible Tests
Print AncillariesStudent Activity Workbook, Chapter 31Marketing Math Workbook, Chapter 31BusinessWeek Reader with Case Studies, Chapter 31Competitive Events Workbook, Unit 10Marketing Research Project WorkbookSchool-to-Career Activity Workbook
Interactive Chalkboard classroom presentations, Chapter 31 Online Learning Center through glencoe.com
Enrichment Resources at the Online Learning Center through glencoe.com
Online Student Edition, Chapter 31TeacherWorksTM Plus ExamView® Assessment Suite, Chapter 31 Virtual Business
CHAPTER PRINT MATERIALS TECHNOLOGY RESOURCES
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Chapter 32 From Unit 10 Fast File BookletLesson PlansChapter SummariesReproducible MastersReproducible Tests
Print AncillariesStudent Activity Workbook, Chapter 32Marketing Math Workbook, Chapter 32BusinessWeek Reader with Case Studies, Chapter 32Competitive Events Workbook, Unit 10Marketing Research Project WorkbookSchool-to-Career Activity Workbook
Interactive Chalkboard classroom presentations, Chapter 32 Online Learning Center through glencoe.com
Enrichment Resources at the Online Learning Center through glencoe.com
Online Student Edition, Chapter 32TeacherWorksTM Plus ExamView® Assessment Suite, Chapter 32 Virtual Business
Marketing Internship Tell students that as part of this unit, they will participate in a hands-on marketing internship simula-tion at the close of the unit. As they study each chapter in the unit, they can prepare for the project by doing the research listed on the checklist. They will conduct research using a variety of resources and apply academic, basic, and technology skills. Upon comple-tion of each unit project, students will have a tangible example of their work to add to a real-world career portfolio.
Marketing Internship Tell students that as part of this unit, they will participate in a hands-on marketing internship simula-tion at the close of the unit. As they study each chapter in the unit, they can prepare for the project by doing the research listed on the checklist. They will conduct research using a variety of resources and apply academic, basic, and technology skills. Upon comple-tion of each unit project, students will have a tangible example of their work to add to a real-world career portfolio.
RELATE THE UNIT TO THE MARKETING PLANThe four Ps of the marketing mix include product, place, pricing, and promotion. Unit 10 focuses on the product aspect.
MARKETING PLAN OVERVIEWLet students know that all of the deci-sions a business makes in the production and sale of its products involve aspects of product and service management.
Marketing Core FunctionsPoint out to students that Chapters 30, 31, and 32 will deal with the marketing core function Product/Service Management.
Product/Service Management Obtaining, developing, maintaining, and improving a product or a product mix in response to marketing oppor-tunities helps understand and fi ll the consumers’ needs and wants.
For WebQuest teaching suggestions and rubrics, go to the Teacher Center of this book’s Online Learning Center (OLC) through glencoe.com.
glencoe.com
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IMPLEMENTATION OrganizationManagementStaffing
BUDGET Cost of SalesCost of PromotionIncome and Expenses
Marketing Core Functions Product Service Management
A growing number of companies are rethinking packag-ing for their products. They promote improvements in their ads.
PRINT AD IMAGE
Log on to glencoe.com and go to the Marketing Essentials OLC. Find the WebQuest for Unit 10. Begin the activity by
searching three products that use ecologically conscious packaging.
Marketing Internship A food supplier wants to create and market healthy low-carb and/or food replacement products.As you read, use this checklist to prepare for the unit project:✓ Make a list of ten low-carb foods or meal replacement products.✓ Find Web sites discussing diet trends and healthy foods.✓ Find three food stores in your community that sell low- carb items and meal replacement foods.
INTRODUCE THE CHAPTERThis chapter introduces students to the nature and scope of product planning. It discusses the concept of product mix and the importance of product mix strategies and their impact on product planning. The strategies used in each stage of the product cycle are described, along with a discussion of product positioning and category management.
BUILD BACKGROUNDAsk students to name a brand of clothes they like. Then ask them to describe what characterizes that brand, including style, colors, where sold, and the more subtle characteristics such as the messages the clothes symbolize. Tell students they are going to learn how brands are developed and positioned in the marketplace.
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EXPLORE THE PHOTO
Market Talk Lead a discussion about the positioning of clothes in the marketplace. Ask: What values do students look for in clothes? For example, do they want to look casual, stylish, cool, or sporty? How are these values represented in the clothes they buy? How has the manufacturer positioned the clothes they like in the marketplace with physical characteristics, advertising, and distribution channels?
Quick Think Student responses may include good design and good marketing.
Ask students to create three innovations in
sportswear that might be introduced into the market as a part of the product mix for running shoes.
REVIEW THE OBJECTIVESDescribe the steps in product planning. Product planning involves making decisions about what features should be used in selling a business’s products, services, or ideas. Planning requires creativity as well as the ability to interpret current customer needs and forecast new trends.Explain how to develop, maintain, and improve a product mix. To make product mix decisions, a business must take an objective look at sales as well as other factors such as current trends. A product that has experienced success in the past
may not continue to thrive if it fails to respond to changing consumer needs.Identify the four stages of the product life cycle. A product life cycle represents the stages that a product goes through during its life. These are four basic stages of the product life cycle: intro-duction, growth, maturity, and decline.Describe product positioning techniques. positioning by price and quality, positioning by features and benefi ts, positioning in relation to the competition, positioning in relation to other products in a line
632 UNIT 10 — PRODUCT AND SERVICE MANAGEMENT
C H A P T E R 30
Chapter ObjectivesAfter reading this chapter, you should be able to:
• Describe the steps in product planning
• Explain how to develop, maintain, and improve a product mix
• Identify the four stages of the product life cycle
• Describe product positioning techniques
Market Talk Businesses plan, position, and
manage products and services they create.
This process includes determining the product
mix and the product mix strategies. For
example, an automobile manufacturer must
be aware of current trends and anticipate
upcoming ones before sending new automobile
designs to the production line.
Quick Think What do you think it takes for a
new product to be successful?
Product Planning
EXPLORE THE PHOTO
Mark Richards/Photo Edit
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For the Teacher TeacherWorks™ Plus
Teacher Resources at glencoe.com
Interactive Chalkboard ExamView® Assessment Suite Fast File Unit 10
For the StudentMarketing Essentials Online Edition
Student Activity Workbook Marketing Math Workbook Marketing Research Project Workbook School-to-Career Activity Workbook Competitive Events Workbook BusinessWeek Reader with Case Studies
Interactive Student EditionStudent Resources at glencoe.com
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Discuss the performance indicators for the
DECA events listed, so that students understand
how to demonstrate their understanding.
The event acronyms stand for:
AAM: Apparel and Accessories Marketing
Series
ADC: Advertising Campaign Event
ASM: Automotive Services Marketing
Series
BSM: Business Services Marketing Series
EMDM: E-Commerce Management Team
Decision Making Event
FMAL: Food Marketing Series, AL
FMDM: Financial Analysis Management
Team Decision Making Event
FMML: Food Marketing Series, ML
FSRM: Full Service Restaurant Manage-
ment Series
HMDM: Hospitality Services Management
Team Decision Making Event
HRR: Hospitality and Recreation Market-
ing Research Event
MMS: Marketing Management Series
QSRM: Quick Serve Restaurant Manage-
ment Series
RFSM: Restaurant and Food Service
Management Series
RMS: Retail Merchandising Series
SEM: Sports and Entertainment Marketing
Series
SMDM: Sports and Entertainment Marketing
Management Team Decision Making
Event
TMDM: Travel and Tourism Marketing
Management Team Decision Making
Event
TSE: Technical Sales Event
Find timed DECA Prep activities correlated to the Competitive Events Workbook for students and DECA tips for teachers at the Marketing Essentials OLC through glencoe.com.
Chapter 30 — Product Planning 633
ROLE PLAY Check your understanding of DECA performance indicators with the DECA activity in this chapter’s review. For more information and DECA Prep practice, go to the Marketing Essentials OLC through glencoe.com.
glencoe.com
DECA Events These acronyms represent DECA com-petitive events that involve concepts in this chapter:AAMADC*ASMBMDM*BSM
EMDM*FMALFMML*HLM*HMDM*
MMS*QSRM*RFSM*RMSSEM*
SMDM*TMDM*
Performance Indicators The performance indicators represent key skills and knowledge. Relating them to the concepts explained in this chapter is your key to success in DECA competitive events. Keep this in mind as you read, and write notes when you fi nd mate-rial that helps you master a key skill. In these DECA competitive events, you should follow these perfor-mance indicators:• Explain the nature and scope of the product/service
management function• Identify the impact of product life cycles on
marketing decisions• Describe the use of technology in the product/
service management function• Explain business ethics in product/service
management• Explain the concept of product mix• Describe factors used by marketers to position
products/businessesThe events with an asterisk also include:• Plan product mix• Determine services to provide customers• Explain the role of customer service in positioning/
image• Develop strategies to position product/businessSome events include these performance indicators:
HLM Explain the concept of product in the hospitality industry
To prepare for reading this section, have students imagine they are going to open a retail business and they must determine the types and number of products to be carried. Have them write the following on a separate sheet of paper:
1. Type of retail business they would like to open (for ex-ample, a beauty supply store).
2. Four general categories of merchandise they would like to carry (for example, shampoo, hair coloring, nail polish and cosmetic brushes).
3. Factors that would determine the type and number of prod-ucts they will carry.
Preteaching
VOCABULARYKEY TERMS Read the key terms aloud or ask a volunteer to read them. Ask students to predict the meaning of these phrases and write the phrases and their meaning on a separate sheet of paper.ACADEMIC VOCABULARY Refer students to the OLC through glencoe.com for the Academic Vocabulary Glossary before they read the section.
GRAPHIC ORGANIZERModel using the graphic organizer for students. Tell students to go to the OLC through glencoe.com for a printable graphic organizer.
NCLB
NCLB connects academic correlations to book content.
READING GUIDE
Many students will fi nd it very hard to identify one new consumer product even though advertisers spend large
amounts of money to introduce new products every year.
D Develop Concepts
THE MAIN IDEAAsk a volunteer to read the main idea aloud and ask another student to retell it in his or her own words.
Encourage students to identify generating ideas, screening ideas,
developing proposals/plans, product development, and testing.
BEFORE YOU READ
Step 1Generate Ideas
New Product Development
634 UNIT 10 — PRODUCT AND SERVICE MANAGEMENT
Product PlanningA product is anything a person receives in an exchange. A
product can be a tangible item (a notebook PC), a service (auto repair), an idea (a plan for a marketing campaign), some other abstract good (an education), or a combination of all of these concepts. A product, therefore, includes its physical features, the seller’s reputation, the seller’s services, and the way the prod-uct is viewed by people. Product planning involves making
THE MAIN IDEAProduct planning allows a business to design marketing programs that increase sales through making products that customers want.
GRAPHIC ORGANIZERDraw this chart to write in the seven key steps in product development.
Analysis What
marketing activities
must occur prior
to launching a new
product?
READING GUIDE
OBJECT IVES• Describe the steps in product
planning
• Explain how to develop, maintain, and improve a product mix
KEY TERMS• product planning
• product mix
• product line
• product item
• product width
• product depth
• product modification
ACADEMIC VOCABULARYYou will find these words in your reading and on your tests. Make sure you know their meanings.• unique
• compare
Predict Have you found a new consumer product on a recent shopping trip?
SECTION 30.1
BEFORE YOU READ
Product Planning, Mix, and Development
ACADEMIC STANDARDSEnglish Language ArtsNCTE 1 Read texts to acquire new information.
English Language ArtsNCTE 3 Apply strategies to interpret texts.
Go to the OLC through glencoe.com for printable graphic organizers, Academic Vocabulary definitions, and more.
PRODUCT WIDTH AND PRODUCT DEPTHAsk the students to consider the following scenario: You decide to start a pet store. What types of things do you need to con-sider in determining the width and depth of product offerings? For example, are there other places where people can buy pet food in the neighborhood? Where do they buy pets? What brands of pet food should you carry?
Demonstrate Talk about the Iams pet foods to illustrate how one business estab-lished a unique line of products. Iams is sold in pet stores.
Online ActivityDeveloping Hybrid CarsHave students research hybrid cars for an existing product line using the library, the Internet, and other sources as needed. Ask students why they believe the hybrid car was introduced and to account for the length of time it took for the car to be produced. Have students summarize their fi ndings in a one-page report.
Chapter 30 — Product Planning 635
decisions about what features should be used in selling a business’s products, services, or ideas. These decisions relate to product fea-tures, such as packaging, labeling, and brand-ing, as well as to services, such as product warranties, that are necessary to support the product. Product planning allows a business to coordinate existing products and features offered to customers, add new products, and delete products that no longer appeal to cus-tomers. Product planning requires creativity as well as the ability to interpret current cus-tomer needs and forecast new trends.
Product MixProduct mix includes all the differ-
ent products that a company makes or sells. A large manufacturer may have a variety of products in different categories. For example, Kraft Foods, the second-largest food and bever-age manufacturer in the world, has hundreds of products in five areas: snacks, beverages, cheese, groceries, and convenience meals. Kraft’s key brands include Kraft, Kool-Aid, Maxwell House, Nabisco, Oscar Mayer, and Post products.
A retailer’s product mix is made up of all of the different products the store sells. Retail stores must plan their product mix carefully because they cannot offer all the products that customers may want.
Variations in Product Mixes Have you ever heard of El Caserio or Traki-
nas? Both are brands that Kraft sells outside the United States. El Caserio is a popular cheese in Spain. Trakinas is a cookie sold in Brazil, Thailand, and China. Kraft has a diverse international market and therefore carries dif-ferent product mixes for different customer needs across the world.
The type and number of products to be carried must be based on the objectives of the business, the image the business wants to project, and the market it is trying to reach. This makes product mixes unique to each business. Even similar types of businesses can offer different product mixes.
Product Items and LinesA product line is a group of closely
related products manufactured or sold by a business. Examples include all the car models produced by the Pontiac division of General Motors or all the cereals produced by Kellogg’s.Retailers frequently sell more than one prod-uct line.
A product item is a specific model, brand, or size of a product within a product line. Typically, retailers carry several product items for each product line they sell. A Harley-Davidson motorcycle dealer might carry sev-eral Softail models, such as the Night Train, Deuce, or Heritage Softail Classic.
Product Width and Product DepthThe width and depth of its product offer-
ings define a product mix. Product width refers to the number of different product lines a business manufactures or sells. Product depth refers to the number of items offered within each product line.
A retailer that sells three brands of jeans—Levi’s, Lee, and Guess—has a product width of three. The product depth is the number of sizes, price ranges, colors, fabric type, and styles for each brand.
Product mix strategies vary with the type of business. Red Lobster restaurants, which spe-cialize in seafood dinners, have considerable product depth within a narrow product line (seafood entrées). Other restaurants may offer broader menus that include steak, chicken, pork, and pasta dinners as well as seafood. Their product mix may have greater width but less depth than Red Lobster’s.
Both manufacturers and retailers must decide on the width and depth of their product mix. To determine its product mix, a business needs to identify its target market, its compet-itors, and the image it wants to project. After a target market and an image are identified, a business must determine which product lines and items to manufacture or sell. Busi-nesses must also periodically review whether its existing product lines need to be expanded, modified, decreased, or eliminated.
Extended ActivityProduct PositioningHave students research the types of pet foods that exist today and how they dif-ferentiate themselves from one another. Then, have students perform the same research for another product.
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D Develop ConceptsProduct Mix Strategies After students have read the section on product mix strategies, ask them to list possible product mixes for the following:• teas
fruit teas, decaffeinated teas, blends of teas, English teas, Chinese teas
• grooming supplies brushes, shampoos, make up, shaving implements
• cars convertibles, coupes, SUVs
Clarify Tell students that introducing a new product into a product mix is a decision not made lightly. It involves several different departments or business units, such as marketing, research and development, manufacturing, and fi nance. All parties have to try to understand not only whether the product will be successful but whether it will complement the other products in the mix. They must answer the questions: Will this product confuse consumers, will it weaken brand loyalty to the other products in the line, will it take market share away from the other products in the line?
AD GUIDE • TARGETING CAT PEOPLE and DOG PEOPLE
Discussion Lead a discussion with students on this issue: How can a company extend its product mix in the future? Ask: What are the possibilities for introducing new products later on? For developing their brand more distinctly? Have students share their responses and provide examples.
Caption Answer Cat and dog food are made of similar ingredients but target different markets: owners of cats and owners of dogs.
Ask students what other products Iams might include in its product mix.
636 UNIT 10 — PRODUCT AND SERVICE MANAGEMENT
Product Mix StrategiesA product mix strategy is a plan for deter-
mining which products a business will make or stock. Businesses can use different product mix strategies depending on their resources and objectives. Some businesses develop com-pletely new products to add to their existing product lines. Others expand or modify their current product lines. Sometimes businesses drop existing products to allow for new prod-uct offerings.
To make these decisions, a business must take an objective look at sales as well as other factors such as current trends. A product that has experienced success in the past may not continue to thrive if it fails to respond to changing consumer wants and needs.
Developing New Products Successful new products can add substan-
tially to a company’s overall sales and boost
its market share. Often a slight variation of the original or existing product can lead to increased sales.
Procter & Gamble (P&G), the number-one U.S. maker of household products, de-votes roughly 15 percent of its research and development budget to developing new products. Innovative P&G products that have created new consumer-goods categories include Febreze odor removers, the Swiffer dry-mop system, and the Dryel home dry-cleaning kit.
According to one study, new products (those less than five years old) account for about 35 percent of total sales for major con-sumer and industrial goods companies. New products can help a company’s image by building the company’s reputation among customers as an innovator and leader. In addition, a new product may increase mark-ups and profits to sellers because its price
• TARGETING CAT PEOPLE and DOG PEOPLE Iams offers pet food for both cats and dogs.
Why does Iams make both varieties of pet food?
D
S
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SECTION 30.1
CONTINUED
S Skill PracticeIndependent PracticeDeveloping New Products Provide students with the following scenario to use for the levelled activities: You have decided to open a pet store. Your monthly expenses, including rent for the store space, utilities, and advertising, will be $1,300.
L1 You need to pay yourself a salary of $2,000 a month. How much should you budget for these expenses in the fi rst year?Expenses, including your salary, will be $39,600.
L2 The landlord has decided to raise the rent on the space you occupy for your pet store by 15 percent a year. Your utili-ties and advertising also have gone up 15 percent. You were paying $1,300 a month for these expenses. How much more will you have to pay.You will now have to pay $1,495 a month, an additional $195.
L3 In your fi rst year of operating a pet store, you made a gross profi t of $12,500 on sales of pet food. If the markup on pet food is 40 percent, what is total sales of pet food for the year?$12,500 � 40% � $31,250
Demonstrate Have a local pet store owner come in and talk about how he or she deter-mines the store’s product mix and makes enough money to keep the store going.
Online ActivityProduct TestingHave students research product testing online. Have students write a one-page report summarizing their fi ndings.
Extended ActivityAsk students: How do you think manufactur-ers can position their products in the market-place using different distribution channels? Encourage students to provide concrete exam-ples and to share their responses in class.
Chapter 30 — Product Planning 637
tends to be 10 to 15 percent higher than that of some older, comparable products.
New product development generally in-volves seven key steps (see Figure 30.1):
1. Generating ideas 2. Screening ideas 3. Developing a business proposal 4. Developing the product 5. Testing the product with consumers 6. Introducing the product
Generating Ideas New product ideas come from a variety of
sources, including customers, competitors, channel members, and company employees. Current and existing customers are frequently involved in focus groups or idea sessions designed to generate new product concepts in as many categories as possible. Creativity is essential for new product development.
Many companies that manufacture con- sumer packaged goods use a task force approach to new product development. With this approach, employees from different departments, such as marketing, sales, manu-facturing, finance, and research and develop-ment, take a new concept from the idea stage through the seven steps of product devel-opment. Companies that manufacture and sell industrial products often establish ven-ture teams that are independent of any par-ticular department. Venture teams normally develop new products that are not part of the company’s existing business.
Screening Ideas During the screening process, ideas for
products are evaluated. They are matched against the company’s overall strategy, which defines customers, target markets, competi-tors, and existing competitive strengths.
During the screening process, marketers evaluate new ideas for potential conflicts with existing products.
A screening might involve concept testing with consumers. Consumers would be asked
to identify attributes they liked and disliked about the new concept and to indicate how willing they would be to buy such a prod-uct. The purpose of the screening stage is to find the products that deserve further study. A large number of products are rejected in the screening stage, making it an important preliminary step.
Developing a Business Proposal A product idea that makes it through the
screening process is evaluated in terms of its profit potential. A business proposal is devel-oped to evaluate the new product in terms of the size of the market, potential sales, costs, profit potential, technological trends, overall competitive environment, and level of risk. During this stage, production requirements must be considered. How long will it take to create and introduce the new product? Can it be produced efficiently and at a competitive price? The business plans a program to study the feasibility of making and marketing the new product.
Developing the Product During product development, the new
product idea takes on a physical shape, and marketers develop a marketing strategy. The company makes plans relating to production, packaging, labeling, branding, promotion, and distribution.
During this phase of product develop-ment, technical evaluations are made to see whether the company can produce the new product and whether it is practical to do so. The Ben & Jerry’s ice cream com-pany had difficulties when it first developed Cherry Garcia ice cream. The original idea was to add whole chocolate-coated cherries to theice cream. But the whole cherries were too large to go through the production machinery, which caused the chocoate to break off the cherries. After numerous tests, the company finally added the cherries and the chocolate separately.
In addition to detecting difficulties with product production, tests are conducted on products to see how they will hold up
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SECTION 30.1
CONTINUED
S Skill PracticeIndependent PracticeProduct Lines
L1 Think of a food product you or someone you know consumes often. List what might be some other products in this product line. Example: if an individual consumes ice cream, other products might include frozen yogurts, ice cream bars, frozen fruit bars.
L2 List three different ways a company might categorize its products into differ-ent product lines.By type of product, by geographical area in which it is sold, by its distribution channel.
L3 Develop a one-page written pro-posal for a new product line of cat foods. Include the products in the line, the rationale for the line, how the different products will enhance the other prod-ucts in the line, how the products will be marketed.
Extended ActivityAsk students: What are the factors that infl uence a company’s product mix?Students may mention consumer preferences, the cost of launching and promoting a new product, the existing product mix, and how the new product fi ts in with the existing product mix.
The Steps in New Product Development
Discussion Review the product development steps with students and ask them to give an ex-ample of each for one product in a line of cars. Have students give reasons for their responses and share them with the class.
Caption Answer The idea is the critical fi rst step in new product development. It is a creative process that perceives a need and a way to fi ll it. If the idea passes the screening process, a prod-uct is developed, tested, and introduced to the market.
For instructions, ideas, and answer guide, go to the Teacher Center at the Marketing Essentials OLC through glencoe.com.
30.1
GENERATING AND SCREENING IDEAS
INTRODUCING THE PRODUCT
WRITING A BUSINESS PROPOSAL /DEVELOPING THE PRODUCT/TESTING THE PRODUCT
EVALUATING CUSTOMER ACCEPTANCE
638 UNIT 10 — PRODUCT AND SERVICE MANAGEMENT glencoe.com
30.1 The Steps in New Product Development• Getting an Idea Into a Consumer’s Hands Developing new products involves several key steps.
How does an idea lead to a product?
Go to the Marketing Essentials OLC through glencoe.com to find a project on the process of new product development.
Generating ideas involves tracking cultural trends and observing
customer behaviors. Screening ideas for new products includes
eliminating possibilities until one or two ideas are selected for
development and a business proposal is written.
If customer response is favorable, the product is
introduced into the marketplace.
A business proposal evaluates the proposed product
in terms of size of market, potential sales, costs,
profit potential, technology, the competition, and the
level of risk involved. During the development stage, a
prototype is made for testing.
After the product has been introduced, marketers track
D Develop ConceptsIntroducing the Product Tell students that 70 percent of new product introductions fail at the retail level. Ask students to discuss some of the reasons for failure of new products. Answers may include consumer prefer-ences, not a compelling need, not mar-keted to the right audience, not promoted adequately.
Demonstrate Show students a docu-mentary on how a certain product was invented, developed, and marketed.
S Skill PracticeIndependent PracticeDeveloping Products
L1 Have students generate three ideas for pet food products. Answers might include food for young cats, food for advanced age cats, food for cats with kidney problems and food for nursing cats
L2 Have students generate three ideas for pet food products and develop a focus group of several fellow students to see how they would react to these products. Have students summarize their results in a one-page report.
L3 Have students generate three ideas for pet food products and list the factors in scientifi c, medicine and food research that might make them change their pet product mix within the next few years. For example, new medical techniques might make it possible to diagnose cat diseases more easily; advanced medical techniques might make it possible to give cats the right nutrition to make them live longer.
Discussion Tell students that fast food restaurants have tried to change their product mix to make themselves less vulnerable to lawsuits by introducing more healthy meals. See if students can name some of these changes.
Answer: Some students may say that it is an individual’s responsibility to watch what one eats, while others may say that a corporation should be responsible for providing accurate nutritional information and/or informing the consumer about potentially dangerous or unhealthy ingredients in their products.
For instruction, ideas, and answer guide, go to the Teacher Center at the Marketing Essentials OLC through glencoe.com.
Ask students to look for advertisements for healthy fast-food.
Hold the Sugar
Chapter 30 — Product Planning 639glencoe.com
during normal and not-so-normal use by the consumer. A new product may be tested for durability in the lab by machines that will reproduce the actions or motions that the product will undergo during use. Technical problems should be detected at this stage so that they can be corrected before full-scale production begins.
The government requires extensive testing in various stages for some products, such as prescription drugs and genetically engineered food products. These tests end with testing on human beings to determine side effects and problems with the product’s safety. Getting final approval from the government for use by the general public can take years.
Testing the Product With Consumers New products frequently are test-marketed
in certain geographic areas to see whether consumers will accept them. Larger com-panies establish research and development departments that work with marketing staff, marketing research staff, and outside research companies to develop and test new products.
Not every new product needs to be test-marketed. A focus group evaluation during development can provide additional input into final product design, uncovering poten-tial problems before production.
In some cases, the costs of test marketing, focus group evaluations, or direct marketing tests to sample households may be too high. Marketers may forgo testing of other prod-ucts because they do not yet have a product to be evaluated. Sometimes a company delays test marketing because it does not want to give competitors information that might help them get a competing product on the market.
Introducing the Product This stage is also called commercialization.
Introducing a new product can be expensive. For example, to convince adults to use Crest Whitening Expressions toothpaste in cinna-mon, citrus, and herbal mint flavors, Procter & Gamble spent about $80 million on a mar-keting campaign.
Hold the Sugar
Suppose you are developing a new low-sugar doughnut. The new doughnut is designed to attract dieters and diabetics. A regular, glazed doughnut has 10 grams of sugar and 200 calories. More than half of the calories come from 12 grams of fat.
Fast-food makers are introducing lower-calorie products because of changing diet trends. In addition, consumers have filed lawsuits in which they claim that their health has been adversely affected by foods that are high in fat and sugar.
Lawmakers Weigh InIn 2004, the U.S. House of Representa-tives passed legislation that would ban lawsuits seeking damages because fast food caused weight gain or health prob-lems resulting from obesity. Proponents of the so-called cheeseburger bill argue that such lawsuits are frivolous and ignore personal responsibility for healthy eating. Opponents of the bill argue that the fast-food industry should not be given federal protection from such lawsuits.
Go to the Marketing Essentials OLC through glencoe.com to find an activity about ethics and product development.
Do you think that companies should be immune from lawsuits over their food content?
New products must be advertised to intro-duce their benefits to consumers. A new or revised distribution network may be needed. The company may need to develop training programs for its sales force. To pay these costs,
CONCEPTSAsk students to list the steps for new product development.Generating ideas, screening ideas, devel-oping a business proposal, developing the product, testing the product, introduc-ing the product (commercialization), and evaluating customer acceptance.
KEY TERMSHave students review key terms, their spellings, and defi nitions in small groups.
C Critical ThinkingTeamwork Divide the class into four groups. Have groups select one exist-ing product line and list a number of products in that line. Then ask them to develop one new product to fi t into the existing line.
INDEPENDENT REVIEWL1 Assign and review Chapter 30activities in the Student Activity Workbook.
L2 Assign and review Chapter 30 activities in the Marketing Math Workbook.
L3 Assign and review Chapter 30 activities in the BusinessWeek Reader with Case Studies.
Extended ActivityProduct Modifi cationsTell students that companies are always thinking of ways to improve their existing products. This is often how new products and product lines are born. Read the story of Classic Coke in the text. Ask students to think of another product that was modifi ed in a similar way, or to think of how a current product might be modifi ed and then marketed in the same way. For example, the Volkswagen Bug was redesigned to be bigger and more comfortable.
AFTER YOU READHave students complete the Section 30.1 After You Read section review.
ONLINE STUDY TOOLSHave students to the Marketing Essentials OLC through glencoe.com for the Section 30.1 practice test.
640 UNIT 10 — PRODUCT AND SERVICE MANAGEMENT
Two ways of developing existing products are line extensions and product modifications.
Line Extensions Companies can expand product offerings
by adding new product lines, items, or ser-vices, which may or may not be related to cur-rent products. To illustrate this strategy, think of all the varieties of Tylenol, such as Tylenol Flu, Tylenol Cold, and Tylenol Allergy Sinus. These products also come in a variety of forms, such as tablets, caplets, and gel caps. Each of these products is a line extension of the origi-nal Tylenol product.
A line extension is intended to be a dif-ferent product that appeals to somewhat different needs of consumers. In essence, the company wants to provide a wider range of choices to increase product depth within a line. Line extensions are easy to market because customers are already familiar with the original product on which the extension is based.
Product ModificationsA product modification is an alteration
in a company’s existing product. Modified products may be offered in new and different varieties, formulations, colors, styles, features, or sizes. Product modifications are a relatively quick and easy way to add new products to a company’s product line.
When modifying a product, the old prod-uct often is phased out. Packaging may be modified to appeal to consumers and attract them to the new product.
Deleting a Product or Product Line
Sometimes companies decide that they will no longer produce or sell a particular product or, even a whole product line. There can be many reasons for this move.
ObsolescenceChanges in customer interests and technol-
ogy have caused many products to be dropped. For example, older models of desktop comput-ers have been dropped because newer models are faster and less expensive to produce.
the company must get its new products into the market as quickly as possible.
Evaluating Customer AcceptanceThe purpose of this step is to evaluate
customer acceptance of the product and the marketing strategies used to introduce the product.
One way to obtain customer responses is to study sales information. Scanning equipment and computer systems can be used to compile large amounts of sales and market data on existing and new products. From this infor-mation, customized reports can be prepared. These reports help answer key questionssuch as:
• How often do customers buy the new product?
• When did customers last buy the new product?
• Where are the best customers for our new product?
• What new products are customers buying?
Developing Existing ProductsCompanies constantly review their prod-
uct mix to see if they can further expand their product lines or modify existing products. They do this in order to build on an already established image, to appeal to new markets, and to increase sales and profits. Companies that have successful product lines often add products to those lines in order to take advan-tage of customers’ positive attitudes toward the brand name.
One disadvantage of adding new products to a company’s product mix is the cost factor. Adding products or product lines increases inventory, promotion, storage, and distribu-tion costs. New products also may take sales away from existing products and may require additional training for sales representatives who sell the products. Finally, when a brand or corporate name is placed on a new prod-uct and the product proves to be unpopular, poorly made, or harmful, all products with the corporate name suffer.
Ask students to recall and provide answers to the following questions:
• What is product modifi cation and why is it used?A product modifi cation is an altera-tion in a company’s existing product. It is a relatively quick and easy way to add new products to a company’s product line.
• What are the factors that might make a company discontinue a product? Changes in customer interests and technology, products no longer ap-peal, doesn’t match the company’s current objectives, doesn’t make enough profi t, confl icts with other products in the line.
• What is a line extension of a product line? Give an example. A different product that appeals to somewhat different needs of consum-ers. An example is Tylenol caplets and gel caps, which extend the original Tylenol product.
SECTION 30.1
Key Terms and Concepts
1. It allows a business to coordinate existing products and features offered to customers, add new products, and delete products.
2. Product planning involves making deci-sions about those features needed to sell a business’s products, services, or ideas. Product mix includes all the products that a company makes or sells.
3. Three major strategies include: developing new products, developing existing products, or deleting a product or product line.
Academic Skills 4. 53% increase; 33,677�21,986 �
11,691; 11,691 � 21,986 � 53%
5. Answers may include: Manufacturer Advantage: shelf space availability, access to consumers. Disadvantage: high costs;
Retailer Advantage: pays for costs to add product to inventory. Disadvantage: must take markdowns on discontinued items.
Find answers at the Marketing Essentials OLC through glencoe.com.
30.1 AFTER YOU READ
Chapter 30 — Product Planning 641glencoe.com
Loss of AppealAs consumer tastes change, companies
drop products that no longer appeal to the old tastes. These products may have some lasting loyalties that generate revenue, but the manu-facturers must decide whether these benefits are really worth the expense of keeping the item in their product mixes.
Changes in Company ObjectivesSometimes a product does not match a
company’s current objectives. In 1993, Sears sold one of its subsidiaries, Coldwell Banker real estate company, for this reason. For sev-eral years, Sears had lost market share to other retailers. The company sold some unrelated businesses to focus on its retail objectives.
Replacement With New ProductsTo encourage retailers to cover costs of put-
ting a new product onto limited shelf space,
manufacturers pay slotting fees. Slotting fees for cereal and paper goods often reach $50,000 or more. According to a Federal Trade Com-mission study in 2003, a nationwide product launch might cost $2 million in slotting fees alone. Slotting fees help the retailer balance the costs associated with accepting a new product. A retailer must mark down eliminated prod-ucts and pay for software, labor, and materials to change price labels and enter a new prod-uct into the inventory.
Lack of ProfitProduct developers may drop products
when sales reach such a low level that the return on sales does not meet company objectives.
Conflict With Other Products in the LineSometimes products take business away
from other products in the same product line. Increased sales of one product can cause decreased sales of another product.
Check your answers at the Marketing Essentials OLC through glencoe.com.
Problem Solving:Percent Increase A percent is a ratio that compares values to 100. Percents represent parts of a whole. When deter-mining the percentage of an increase in values, such as sales, first determine the nominal increase by subtracting. Convert that to a decimal number by division. 1. To solve this problem, subtract the
number of products introduced in 1993 from the number of products introduced in 2003 to determine the nominal difference.
2. Divide the number of products introduced in 1993 by the nominal difference to determine the decimal equivalent of the percentage increase.
3. Multiply the decimal number by 100, moving the decimal point two places to the left, for percent increase.
For help, go to the Math Appendix located at the back of this book.
Academic SkillsMath
4. According to Productscan Online, a new product database, there were 33,677 new prod-uct introductions in 2003, compared to 21,986 in 1993. By what percentage did new product introductions increase during that decade?
English Language Arts/Writing
5. Perform an Internet search or visit your school or local library to obtain information about slot-ting fees. Write a one- to two-page paper on the advantages and disadvantages of slotting fees from a manufacturer’s and retailer’s perspective.
30.1 AFTER YOU READ
Key Terms and Concepts 1. Why is product planning important to a
business? 2. What is the difference between product plan-
ning and product mix? 3. What are three strategies for developing an
effective product mix?
NCLB
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NCLB
NCLB Activity correlated to Mathematics and English Language Standards
To prepare for reading this section, have students think of one product that has been around most of their lives—for example, Coke. Then ask students to see if they can defi ne the different ways in which the prod-uct was marketed at different times. Explain that products go through the life cycle stages of introduction, growth, maturity and decline, and require different marketing strate-gies in each cycle. Product position-ing is a way to position the product differently for the different phases of its life cycle.
Preteaching
VOCABULARYKEY TERMS Read the key terms aloud or ask a volunteer to read them. Ask students to predict meaning of these phrases and write the phrases and their meaning on a separate sheet of paper.ACADEMIC VOCABULARY Refer students to the OLC through glencoe.com
for the Academic Vocabulary Glossary before they read the section.
GRAPHIC ORGANIZERModel using the graphic organizer for students. Tell students to go to the OLC through glencoe.com for a printable graphic organizer.
NCLB
NCLB connects academic correlations to book content.
Students should be able to explain that marketing strategies used for products have to change as products
move through a life cycle.
D Develop Concepts
THE MAIN IDEAAsk a volunteer to read the main idea aloud and ask another student to retell it in his or her own words.
Students may indicate product features, packaging, color, labeling, and
promotional efforts.
BEFORE YOU READ
642 UNIT 10 — PRODUCT AND SERVICE MANAGEMENT
The Product Life CycleA product life cycle represents the stages that a product
goes through during its life. There are four basic stages of the product life cycle: introduction, growth, maturity, and decline (see Figure 30.2). As each stage in the product life cycle is reached, marketers must adjust their product mix and their mar-keting strategies to ensure continued sales.
THE MAIN IDEAProducts go through different stages of growth and decline. Various marketing strategies are used to sustain product sales over time.
GRAPHIC ORGANIZERDraw this chart to record each stage in the product life cycle and to list sales characteristics and marketing strategies for each stage.
OBJECT IVES• Identify the four stages of the
production life cycle
• Describe product positioning techniques
KEY TERMS• product life cycle
• product positioning
• category management
• planograms
ACADEMIC VOCABULARYYou will find these words in your reading and on your tests. Make sure you know their meanings.• aware
• guarantee
Stages in the Product Life Cycle
Stages
Introduction
Sales Characteristics Marketing Strategies
Go to the OLC through glencoe.com for printable graphic organizers, Academic Vocabulary definitions, and more.
READING GUIDE
Predict How do marketing strategies differ for a new product and for an established one?
SECTION 30.2
BEFORE YOU READ
Sustaining Product Sales
ACADEMIC STANDARDSEnglish Language ArtsNCTE 1 Read texts to acquire new information.
ScienceNSTA Content Standard E Understandings about science and technology
THE PRODUCT LIFE CYCLEAsk the students to consider the following scenario: You have invented a new type of computer that allows the user to issue voice commands. There is no keyboard. Discuss how you would spend your marketing dollars during the four phases of the product life cycle. List student responses on the board.
D Develop ConceptsDrawing ConclusionsManaging During the Maturity
Stage After students have read the section of managing during the various stages of a product’s life, ask them to discuss how Coke, which is in its mature stage, is managed. They should address these questions:
• What competitive products must Coke manage against? Pepsi, other colas, other soft drinks
• What advertising campaigns has Coke put into place to manage against competition? The Real Thing campaign, for one
• What distribution strategies help Coke manage against the competition?
served exclusively in some restaurants• What other strategies has Coke
employed? introduction of Classic Coke
Have students share their responses in class.
Demonstrate Discuss other soft drink management strategies, such as contests in which you win a prize according to what appears on a bottle cap and tie-ins with fast food chains.
SECTION 30.2
The Product Life Cycle
Discussion Figure 30.2 shows the relationship between the time a product has been in the market and the amount of profi t it earns. Have students think of familiar products that have been in the market a long time. What stage of the life cycle do students think these products are in? Have any of them been reinvented for a new target audience?
Caption Answer Sales are relatively fl at during the maturity stage because many people in the target market may own the product or there may be more competition for the product.
For instructions, ideas, and answer guide, go to the Teacher Center at the Marketing Essentials OLC through glencoe.com.
30.2
Ask students to think about the stages of product life cycle the next time they go to the store. Ask: What products have been reinvented to give them a longer life?
Time
Introduction
Sales
Profits
Growth
Maturity
Decline
Do
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Chapter 30 — Product Planning 643glencoe.com
Managing During the Introduction Stage
When the product is introduced to the market, the company focuses its efforts on promotion and production. The major goal is to draw the customer’s attention to the new product. The company works to build its sales by increasing product awareness. Special promotions may get the customer to try the new product. The costs of introducing a prod-uct are high. Therefore, this is usually the least profitable stage of the life cycle.
Managing During the Growth Stage
During the growth phase of the product life cycle, the product is enjoying success as shown by increasing sales and profits. Much
of the target market knows about and buys the product. Advertising may now focus on consumer satisfaction, rather than on the ben-efits of new products. By this time, the com-petition is aware of the success of the product and is likely to offer new products in order to compete. To keep its product sales grow-ing, the company may introduce new models or modify the existing product to offer more than is offered by the competition.
Managing During the Maturity Stage
A product reaches the maturity stage when its sales level off or actually slow down.The product may have more competition now,or most of the target market consumers may already own the product.
Go to the Marketing Essentials OLC through glencoe.com to find a project on the product life cycle.
• Understanding the Product Life Cycle The life cycle of a
S Skill PracticeIndependent PracticeGive students the following leveled activities:
L1 Think of one product that is in its mature stage. List how you think the com-pany is managing the product, in terms of advertising, promotions, distribution channels, and changes to the product.
L2 Assume you have a line of pet foods and it has now reached the mature stage. There is new competition in the form of healthy pet food on the market. What strategies would you adopt to cope with the competition? reinvent the foods for a healthier empha-sis, sell them at a discount
L3 Pick one product currently being sold in the market. Write a one-page essay or give a fi ve-minute oral presen-tation on how you would reinvent the product for greater sales. Possible answer: Purina Cat Chow—add cat foods for young kittens, older cats, cats with kidney problems.
SECTION 30.2
CONTINUED
Extended ActivityProduct PositioningUsing the example of the personal care-line OT found in the text, ask students to invent some names for these imaginary products in the line:• bar soap • bubble bath • shower gel• deodorantBring in an ad for a grooming or per-sonal care product that shows product positioning. Use the example to talk about how the product is positioned by the ad.
Snowboarding Without Snow
Discussion The Freeboard is an example of taking an idea that has proved popular and extending it to create new product. Ask students to think of other examples of this.
Answer: Freeboard X-80s are in the introduction stage, while skateboards are in the maturity stage. The focus of the marketing efforts should be on promotion and production. The major goal is to draw the customer’s attention to the new product. The company should build its sales by increasing product awareness. Special promo-tions may get the customer to try the new product.
For instructions, ideas, and answer guide, go to the Teacher Center at the Marketing Essentials OLC through glencoe.com.
644 UNIT 10 — PRODUCT AND SERVICE MANAGEMENT glencoe.com
During this stage, a company spends more of its marketing dollars fighting off the com-petition. As advertising expenses climb, the company may have to decide whether it can continue to improve the product to gain addi-tional sales.
Managing During the Decline Stage
During the decline stage, sales fall. Profitsmay reach the point where they are smallerthan the costs. Management will need to decide how long it will continue to support
the product. Besides dropping the product,the company can use other product mix strategies to try to gain further sales from a de-clining or failing product. These strate giesinclude selling or licensing the product, recommitting to the product line, discount-ing the product, regionalizing the product,and modernizing or altering the product.
Sell or License the Product Many companies sell or license their poorly
performing products to risk-taking compa-nies. Risk-taking companies try to rejuvenate
Snowboarding Without Snow
Winter snowboarding has grown in popularity. From 1997 to 2002, the number of snowboarders doubled to 5.6 million, according to the National Sporting Goods Association. A new product now allows snowboarders to do urban snowboarding after the snow melts. No bindings, boots, or warm clothing is required.
The new boards have a long, hourglass shape, center wheels, and wide-set wheels to simulate a snowboarding ride. The boards are designed to allow riders to slalom down steep streets better than they can with skateboards.
A New Product for an Existing Market
In 1996, Steen Strand designed a prototype of the new board as a project for his master’s degree in design at Stanford University. Strand’s Freebord X-80 gives the sensation of snowboarding because it has the ability to rotate 360 degrees while on descent. The Freebord X-80 offers two swiveling wheels that sit near the nose and tail of the board. Weight is displaced from the center of the board to the wheels, which spins the board in circles as well as turns it sharply uphill to control speed.
Freebords were so hot in Asia that a Taiwanese company developed its own version of the board.
Compare Freebords X-80s to skateboards in the product life cycle. What marketing strategies would you use for the Freebord X-80?
Go to the Marketing Essentials OLC through glencoe.com to find an activity about product development.
S Skill PracticeIndependent PracticeMarketing Through the Product
Life Cycle
L1 Ask students to list the strategies used to manage a product during the declining stage of its life cycle.
L2 Ask students to list the strategies used to position a product in the market-place and to give an example of each.
L3 Give students the following scenario: Assume you are the product manager for a new product in cellular telephones—a cell phone/TV. List the strategies you might use to position the product in the marketplace. Answers might include emphasize the price of the TV feature, the convenience of having a small television you can carry with you, how having a television and cell phone beats all other cell phone products, etc.
D Develop Concepts
Category Management Ask students to defi ne the concept and aim of category management. Category management is a process that involves managing product categories as individual business units. The aim of the process is to put manufacturers in closer touch with customer needs.
Extend Ask students: Why is placement on shelf space so important in many retail stores? Products placed near one another can complement or compete. Some placements will appeal to target audiences, such as children’s cereals or toys down low on the shelf where they will be more visible.
Extended ActivityDiscuss how the camera phone may have evolvedw and whether ethical concerns were thought through by phone producers initially. It is possible this phone will be banned in certain situations because of privacy con-cerns. Ask students to consider how ethical concerns or legal applications can affect the life of a product and to discuss their responses in class.
Answer The goal of product positioning
is to set the product apart from the competition.
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Chapter 30 — Product Planning 645
the product by changing the product’s image or introducing it to a new market.
Recommit to the Product LineSome companies decide that a declining
product has other possible uses that can help improve sales.
Even with recommitment and advertising of new product uses, there is no guarantee that a product will continue to have enough sales. Eventually, it may need to be discontinued.
Discount the ProductMany declining product lines can be saved
from deletion by discounting them to compete with cheaper store or private brands.
Regionalize the ProductSometimes companies decide to sell declin-
ing products only in the geographical areas where there is strong customer loyalty. The Nabisco Food Group markets its My-T-Fine desserts only in northeastern states where it still has a significant customer base. By mar-keting its product only in that area, the com-pany avoids the cost of national advertising and distribution.
Modernize or Alter the Product Offering Some products can be altered or modernized
to avoid deletion. Products can be completelyredesigned, packaged differently, or reformu-lated. Tide laundry detergent—available in powder form in a box—was redesigned as New Tide. The product was also introduced in liq-uid form and repackaged in a plastic bottle.
Companies spend large amounts of money to develop and promote consumer and indus-trial products. As a result, they are reluctant to delete products without trying one of the above strategies. When products must be dropped, a company needs to plan the move carefully to avoid disappointing customers and damaging the company’s overall image.
Product PositioningThe focus of product positioning is the
image that a product projects. The goal is to set the product apart from the competition.
Product positioning refers to the efforts a business makes to identify, place, and sell its products in the marketplace. To position products, businesses identify customer needs and determine how their products compare to the competition. Many strategies are used to position products.
Positioning by Price and QualityCompanies position their products in a
product line on the basis of price and qual-ity. A company may offer an economy line, a mid-priced line, and a luxury line. Position-ing by price and quality stresses high price as a symbol of quality or low price as an indication of value.
The Ford Motor Company deliberately positions its Focus as an economical compact car while still emphasizing quality. It positions its Mustang as a high-performance car. Promo-tional efforts are aimed at creating price and quality images for these products. This strat-egy enables Ford to give each of its products a unique position in the marketplace.
Positioning by Features and Benefits
Products are associated with a feature, attribute, or customer benefit. OT, a line of personal care products for boys ages 9 to 16, was introduced in 2004. Research had indi-cated that preteen and teenage boys were dis-satisfied with choices available in personal care products. The product line includes shampoo, deodorant, body wash, hair gel, and pomade with rugged names such as Pit Defense and Body Slam. Procter & Gamble, under a licens-ing agreement with OT Overtime LLC, pro-moted the products with bold product names, formulas, and colors to match the intensity of overtime play in sports.
Positioning in Relation to the Competition
Some businesses position their products to compete directly with the products of
Recall What is the goal of product positioning?
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CONCEPTSAsk students to recall the steps for new product development. 1) Generate ideas, 2) screen ideas, 3) develop a business proposal, 4) develop the product, 5) test the product, 6) introduce the product, and 7) evaluate customer acceptance.
KEY TERMS Have students review key terms, their spellings, and defi nitions in small groups.
SECTION 30.2
INDEPENDENT REVIEW
L1 Assign and review Chapter 30 activities in the Student Activity Workbook.
L2 Assign and review Chapter 30 activities in the Marketing Math Workbook.
L3 Assign and review Chapter 30 activities in the BusinessWeek Reader with Case Studies.
AFTER YOU READHave students complete the Section 30.2 After You Read section review.
ONLINE STUDY TOOLSHave students to the Marketing Essentials OLC through glencoe.com for the Section 30.2 practice test.
DVR Benefits at a Low CostDiscussion Ask students to discuss the advantages and disadvantages of bundling technology for the consumer, the producer, and the retailer.
Answer: Most students should recognize that bundled products require special technical expertise to properly install the software and equipment. For most customers, the three step process would be confusing, and since the software is available only online, technical assistance is limited. Unless the product installa-tion process can be simplifi ed, most people probably will prefer to save their money for one of the more expensive DVR units.
For instructions, ideas, and answer guide, go to the Teacher Center at the Marketing Essentials OLC through glencoe.com.
646 UNIT 10 — PRODUCT AND SERVICE MANAGEMENT glencoe.com
other companies. Positioning in relation to the competition is a common strategy when a firm is trying to solidify an advantage over another firm.
It is not always a good idea to compete head-to-head with the industry leader. It might be better to compete as the underdog. Southwest Airlines does a good job of doing that by telling potential customers that the airline is the low-fare alternative to most of the full-service airlines.
Positioning in Relation to Other Products in a Line
Individual products may be positioned in relation to other products in the same line. Starting with the original Palm Pilot fit-in-your-pocket organizer, the company has introduced other handheld products that not only organize information but have added features. For example, the Zire handheld will play MP3s, show photos, and play video clips. The Tungsten handheld allows the user to use e-mail and surf the Web, and the Treo line has all these features plus a phone.
Category ManagementMany manufacturers and retailers are
adopting a process for marketing and selling their products known as category manage-ment. Category management is a process that involves managing product categories as individual business units. A category may include a group of product lines with the same target market and distribution channels. The process is designed to put manufacturers and retailers in closer touch with customer needs.
The category manager is responsible for all the brands for one generic product category, such as foods, beverages, or health and beauty products. The category manager is responsible for the profits or losses of the product mix and product lines in the category. The posi-tion evolved out of the position of product manager. The difference between the two job titles is that a category manager is respon-sible for a generic category and has more
DVR Benefits at a Low Cost
A digital video recorder, or DVR, is a neat way to watch TV. With a DVR system, you can pause or rewind live TV and can record any program for viewing later without complicated programming and the need to keep blank tapes handy.
But buying a DVR can be costly. What if your budget is limited?
A Cheaper AlternativeIf you have a plain old Windows PC, you
can turn it into a DVR by using a product from SnapStream Media, a small company from Houston. SnapStream’s Beyond TV 3 includes DVR software for Windows and the neces-sary hardware—an external TV tuner from Hauppauge Computer Works that plugs into the computer with a simple USB cable. This package is sold on the SnapStream.com Web site. No service fee is charged.
Because this bundled product is really two products that are only loosely integrated, there are multiple installation processes—one for the Hauppauge tuner, one for the most recent tuner hardware updates, and a third installation for Beyond TV 3 software.
What potential problems can you foresee with bundled products that try to replicate more expensive products at a lower cost? Do you think that this product will be successful?
Go to the Marketing Essentials OLC through glencoe.com to find an activity about technology and product development.
Ask students to recall and provide answers to the following questions:
• What is the product life cycle? Name the four stages.The product life cycle is the stages a product goes through during its life span. There are four stages: introduc-tion, growth, maturity, and decline.
• How can a manufacturer’s planogram assist retailers?A planogram is a computer-developed diagram that shows retailers how and where products within a category should be displayed on a shelf at individual stores. This helps to maxi-mize a product’s potential. Placement can also be used to highlight other products that can be used in conjunc-tion with the product.
SECTION 30.2
NCLB
NCLB Activity correlated to Mathematics and Social Studies Standards
Key Terms and Concepts
1. The focus is the image a product projects. The goal is to set the product apart from the competition.
2. Stress price and quality, stress product features and benefi ts, stress unique characteristics, compare the product to the competition, show a relationship to other products in the line.
3. Category management is a process that involves managing product categories as individual business units.
Academic Skills 4. Product A is less profi table. Product A:
$110 (RP) � 19,500 units � $2,145,000; ($65 � $4.30) � 19,500 units � $1,351,350 costs; $2,145,000 � $1,351,350 � $793,650 net profi t.
Product B: $72 (RP) � 56,000 units � $4,032,000; ($38 � $7.50) � 56,000 units � $2,548,000 costs; $4,032,000 � $2,548,000 � $1,484,000 net profi t.
5. All reports should demonstrate an under-standing of the product’s life cycle.
Find answers at the Marketing Essentials OLC through glencoe.com.
Virtual BusinessIntroduce merchandising to students using Knowledge Matters’ Virtual Business Retailing visual simulation, Merchandising. In this simulation, students learn how product placement within a store can affect sales.
30.2 AFTER YOU READ
Number and Operations: Computing Profit When solving prob-lems that involve calculating the profit, make a list of all the costs involved. Subtracting the total costs of the product from the total sales equals the profit of the product.1. To solve this problem, determine the
dollar amount in sales by multiply-ing the retail price by the number of products sold for both products.
2. Determine the total cost of each product by adding the production and distribution costs per item and multiplying by the total number of products sold.
3. Subtract the total costs from the total sales to determine the profit of each product.
4. Compare the two products’ profits to determine which is more profitable.
For help, go to the Math Appendix located at the back of this book.
Chapter 30 — Product Planning 647glencoe.com
product mix by projecting sales volume and profits for a retailer. The manufacturer then suggests adding or deleting certain items to its product mix. If the category manager feels that one product is decreasing sales of other products in the same category, this one prod-uct may be discontinued.
Another way manufacturers can help retail-ers is through planograms. A planogram is a computer-developed diagram that shows retailers how and where products within a category should be displayed on a shelf at individual stores. This maximizes a product’s potential. Placement can also be used to high-light other products that can be used in con-junction with a product. Manufacturers can even customize planograms for specific types of stores. Each store can stock more products that appeal to people in its trading area and fewer products with limited appeal.
Check your answers at the Marketing Essentials OLC through glencoe.com.
interaction with other managers from finance, production, and research and development. A product manager handles a particular prod-uct and has more direct interaction with the company’s sales force.
The manufacturer can customize a product mix within a category according to customer preference on a store-by-store basis. Using scanned data on product sales and other mar-ket data, manufacturers assist retailers with their product mix. In examining product mix, a manufacturer determines which of its products a particular retailer does not carry. It also identifies products that would have strong sales potential for both the retailer and the manufacturer. This analysis helps the manufacturer to recommend an optimum
Key Terms and Concepts 1. What are the focus and goal of product
positioning? 2. List four strategies used to position products
in the marketplace. 3. What is category management?
30.2 AFTER YOU READ
Academic SkillsMath
4. The Dryers Company has two declining pro-ducts and is considering deleting one. Product A costs $65 per unit to produce and sells for $110. The storage, distribution, and promotion costs average $4.30 per unit. Last year, 19,500 units were sold. Product B costs $38 to produce and sells for $72. Its storage, distribution, and promotion costs average $7.50 per unit. Last year, 56,000 units were sold. Which product is less profitable and should be deleted?
Social Studies/History
5. Perform an Internet search or visit a school or local library to investigate the history of a pop-ular consumer product. Write a one-page report on when and where it was introduced, how it is used, and who manufactures it today.
Continuing education is crucial in most careers because workers must adapt to changes in technology and the marketplace.
For instructions, ideas, and answer guide, go to the Teacher Center at the Marketing Essentials OLC through glencoe.com.
Lifelong Learning
CAREER INFORMATION Have students go to the Marketing Essentials OLC through glencoe.com and fi nd Chapter 30 Careers page and click on the American Marketing Association’s Careers Strategies and Tips. Ask students to select one article, read it, and summa-rize it in three short paragraphs.
PRODUCT PLANNINGFor students who do not wish to pursue a career in product development, the most relevant information in this chapter may be understanding the product life cycle in terms of a planned purchase. The best time to buy a product may not be at the moment it is introduced. Tell students that by keeping informed of new products in development or changes to already existing products, they can learn to be educated consumers.
PrimarySourceAsk students to go to the Marketing Essentials OLC through glencoe.com and fi nd Chapter 30 Resources. Ask them to click on the link for the American Market-ing Association’s marketing dictionary and read the defi nitions of the terms they fi nd that are related to product planning.
Test-Taking StrategiesSuggest that if students do not know the answer to a test question, they can skip the question and come back to it as time allows. Inform students that sometimes they will fi nd they know the answer when they return to the question a second or third time.
648 UNIT 10 — PRODUCT AND SERVICE MANAGEMENT glencoe.com
MACK HANANPRINCIPAL GREENSTREEM.COM LLC
What do you do at work?
I specialize in the creation and take-to-market implementation of fast-growth business models, both for mature businesses of Fortune 500 corporations, and for start-up and early stage companies. I specialize in companies that deal with high-tech or cutting- edge technologies in one way or another.
What skills are most important to you?
It is important to have a strong market sense, as well as an up-to-date understanding of technology. I also have to stay informed on the interplay between social trends and government policy compliance. Strategic creativity is important, as are the ability to lead the adoption of change and people skills as a team leader.
What is your key to success?
I am a zealous advocate of creative strategies, and I work hard to ensure their effective application. It is important to always remain dedicated to my client’s objectives. Also, I understand that my compensation is based solely on the performance of my work. In other words, the old adage that the customer is king is still true. So is the rule that good, expert work will be rewarded.
Courses business, marketing
Degrees BA, MBA
High-level consultants might begin their careers as employees of a fi rm, helping apply technology to business and marketing needs. The path of such a career is largely determined by interests, passion, and aptitude.
Growth to increase faster than average for the next ten years
Source: Occupational Outlook Handbook
Strong understanding of technology as it applies to your chosen industry
Go to the Marketing Essentials OLC through glencoe.com to fi nd a career-related activity.
Why is continuing education crucial in most careers?
See the Glossary at the back of this book for defi nitions of Key Terms. Academic Vocabu-lary defi nitions are on the book’s OLC.
1. A sample answers might read:Key Terms A product item is a specifi c model, brand, or size of product within a product line.Academic Vocabulary Unique means distinctively characteristic.
Ask volunteers to read the summaries aloud and give the classroom one real-life example for each concept.
2. A product item is a specifi c model, brand, or size of product within a product line. A product line is a group of closely related products that are manufactured and/or sold by a business.
3. Product width is the number of different product lines a business carries. Product depth is the number of product items offered within each product line.
4. The types of criteria are general product, marketing, and production characteristics.
5. Marketers use marketing research techniques during product develop-ment and continued monitoring of product performance after introduction to evaluate customer acceptance.
6. Reasons include: to build on an already established image, to increase sales and profi ts, to offer customers complementary products, and to appeal to new markets.
7. Strategies might include heavy advertising and other means of promotion, such as in-store displays, to draw customers’ attention.
8. Strategies might include advertising to compete with similar products and improving the product.
9. Sell or license, recommit, discount, regionalize, modernize, or alter the product.
10. Product positioning refers to the efforts of a business to identify, place, and sell its products in the marketplace.
11. Category management is a process that involves managing product cat-egories as individual business units and is designed to put manufactur-ers and retailers in closer touch with customer needs.
CHAPTER 30 REVIEW
Chapter 30 — Product Planning 649
C H A P T E R 30 R E V I E W
SECTION 30.1• Product planning involves deciding what features are needed to sell a business’s
products, services, or ideas. A product mix strategy is the plan for how the business
determines which products it will make or stock. Businesses can use different product
mix strategies depending on their resources and their objectives.
SECTION 30.2• A product life cycle represents the stages that a product goes through during its life
(introduction, growth, maturity, and decline). The goal of product positioning is to set the
product apart from the competition. Category management is a process that involves
managing product categories as individual business units.
1. On a sheet of paper, use each of these key terms and academic vocabulary words in a written sentence.
2. What is the difference between a product
item and a product line? (30.1)
3. Compare and contrast product depth and
product width. (30.1)
4. What types of criteria are used to screen new
product ideas? (30.1)
5. Explain how marketers evaluate customer
acceptance of a new product. (30.1)
6. What are four reasons for expanding a
product line? (30.1)
7. What strategies might a business use during
a product’s growth stage? (30.2)
8. What strategies might a business use during
a product’s maturity stage? (30.2)
9. List the strategies that a company can use
during a product’s decline stage. (30.2)
10. Explain the concept of product positioning.
(30.2)
11. How does the process of category
management help manufacturers and
retailers? (30.2)
649
12. Workplace Skills Students should be tactful in their
responses to the customer.
13. Technology Applications Reports should describe the effects
of one technological achievement in today’s cars.
Formative AssessmentFormative assessment is an essential component of classroom work. This type of assessment provides information that is then used as feedback to modify teaching and meet student needs.
L1 Review key terms for this section. Ask students to write one sentence for each key term.
L2 Provide examples of factors that affect product positioning in story form. After each, have the students identify which factor is affecting product positioning and explain how it does so.L3 Ask students to come up with stories that illustrate one or several factors that affect how a product is positioned.
If the results of this formative assessment seem low, consider the following activity:
Read the sections’ subheads aloud and have students name two key facts or important details for each.
CHAPTER 30 REVIEW
14. Math Practice At most, 12 stores (2 mass market
stores and 10 small retail chain stores); $90,000 � (2 � $20,000) � $50,000; $50,000 � $5,000 � 10
15. English Language Arts Accept all reasonable reports
that demonstrate research of a company’s products and explain the purposes of having various products. Examples could include a snack foods company which produces various fl avors of cookies, crackers, and other food items.
16. Investigating New Product
Development Student reports should identify the
product, its intended users, and their rationale for believing that the product will or will not be successful.
17. Identifying Product Mix Each outline must detail each prod-
uct item (car brand) in the product line and identify a primary target market for the product.
650 UNIT 10 — PRODUCT AND SERVICE MANAGEMENT
12. Workplace Skills Human Relations You are the manager
of a large grocery store that has recently
remodeled. An exasperated customer
confronts you because he cannot fi nd
a product. He complains that the new
organization of products makes no sense.
What might you do to pacify the customer
and encourage him to continue shopping
at the store?
13. Technology ApplicationsTechnology and Car Features Investigate
how technological improvements have
impacted cars in the past fi ve years. Using a
word processing program, prepare a written
report of 150 to 200 words about one
technological development and its effect on
the kinds of features offered in today’s cars.
14. Math Practice Slotting Fees Retailers sometimes charge
manufacturers slotting fees for helping to
introduce merchandise. Assume that a small
retail chain charges $5,000 per store for a
new brand of hot dogs, while a mass market
merchandiser charges $20,000 per store
for the same product. To how many stores
could you sell your brand of hot dogs if your
company has a slotting allowance budget of
$90,000 and must include at least two mass
market stores?
Problem Solving: Calculating
Fees Calculating fees is done by multiplying
the dollar amount of fees by the number of
stores that will be charged a fee.
For help, go to the Math Appendix located at the back of this book.
15. English Language Arts Product Lines Choose a company that
makes a product you have purchased.
Research that company to determine how
many different products or product lines they
offer. Write a paragraph describing all the
products this company produces and why it
offers the different product lines.
16. Investigating New Product Development
Perform an Internet search for a sports-
related product that is being introduced. Write
a one-page report on the product, its intended
users, and your rationale for believing that the
product will or will not be successful.
17. Identifying Product Mix Explore a Web site for a car manufacturer,
such as Ford, General Motors,
DaimlerChrysler, Honda, Toyota, or another
one of your choice. Identify the product mix
offered by the car manufacturer.
Activity Write an outline detailing one
product line and the primary market for each
product in that product line.
C H A P T E R 30 R E V I E W
650
Students should be evaluated according to the performance standards noted in the role play. For another DECA role play, go to the Competitive Events Workbook or the Student Activity Workbook, or go to the Marketing Essentials OLC through glencoe.com.
For instructions, ideas, and answer guide, go to the Teacher Center at the Marketing Essentials OLC through glencoe.com.
DECA Advisors CornerIf you have a DECA operated, school-based enterprise, have students analyze how your products are selling to determine if products need to be added or deleted from your selection. Have chapter members conduct research among your school’s population to determine their interests.
18. Product Line Extensions Some examples might include
MINI-QUIZRead these sentences to the students and have them volunteer the missing word(s).
1. The category manager is responsible for all the _____ for one generic product category such as foods, beverages, or health and beauty products. (brands)
2. The manufacturer can customize a product mix within a category according to _____ preferenceon a store-by-store basis. (customer)
For an expanded chapter quiz, go to Chapter 30 in the TeacherWorks™ Plus DVD and to Chapter 30 in the ExamView® Assessment Suite.
CHAPTER 30 REVIEW
STANDARDIZED TEST PRACTICE
ANSWERS
1. C 2. F
TEST-TAKING TIPSWhen your students have a standardized test coming up, these last-minute tips and strate-gies will help students relax and do their best.
Test Format Help your students become familiar with the format of the specifi c test they are going to take by practicing with test items that imitate the actual test items.
Test Timing Have your students take one or more timed practice tests so that they become comfortable with the test format.
Chapter 30 — Product Planning 651glencoe.com
Role PlayAccessories Store Assistant ManagerSituation Assume the role of assistant
manager of a store that sells sunglasses and
a limited line of related accessory items. The
store carries eight lines of sunglasses from
well-known designers. The accessory lines
the store carries are sunglasses, cleaners,
and small repair kits. You are training a new
employee (judge) about store operations and
merchandise. The new employee (judge) asks
why the store’s product lines are so limited.
Activity You are to explain to the new
employee (judge) about product width and
product depth and how those two concepts
relate to your store and its merchandise.
Evaluation You will be evaluated on how well
you meet the following performance indicators:
• Explain the concept of product mix.
• Identify product to fi ll customer needs.
• Establish merchandise standards.
• Explain the
nature and
scope of the
product/
service
management
function.
• Orient new
employees.
For more information and DECA Prep practice, go to the Marketing Essentials
OLC through glencoe.com.
18. Product Line Extensions Find a food product manufacturer’s Web
site (Campbell’s Soup, J. M. Smucker, Dean
Foods, Kellogg’s, Hershey Foods, General
Mills, H. J. Heinz, Kraft, Del Monte) to obtain
fi ve examples of product line extensions. Use
presentation software to give an oral report
on the name of the original product and the
line extensions for the product.
1. Directions Choose the letter of the best answer. Write the letter for the answer on a separate piece of paper.
What is the profi t of 420 products that cost $1.30 to produce and sell for $2?
A $290.00 B $294.70 C $294.00 D $250.30
2. Directions Choose either True or False as the answer. Write the letter for the answer on a separate piece of paper.
Product width refers to the number of items offered in within a product line.
T
F
C H A P T E R 30 R E V I E W
STANDARDIZED TEST PRACTICE
Test-Taking Tip
Read and consider all of the answer choices before you choose the one that best responds to the question. Examine each answer choice and think about how each differs from the others.
