Chapter 5
As you read the chapter, make notes about each of the following:
 | Integrated Product Development |
| The Concept of Product |
| Service Characteristics |
| Mass Customization |
| Total Product |
| Major Value Propositions |
| Classifications of Product |
| Consumer Products |
| Business Products |
| Product Life Cycle |
| Planned Obsolescence |
| Product Innovation |
| New Product Diffusion and Adoption |
Define each key term you find.
Summarize each term in your own words. List the important points for each term. Give a "real life" example of each term.
(hover your mouse over the word for a popup definition)
Answer the Objectives.
These tell you what you are expected to know upon completion of the
chapter.
I have made some notes for you. Expand on any that are new to you.
- Define product.
A product is a bundle of attributes that is received when entering into an exchange and which has the ability to meet the need or needs that occasioned the exchange. - Distinguish between core, actual, and augmented product.
The core product is comprised of the key benefits the product provides to the consumer.The actual product people desire is a fleshed out version of the skeletal core product. An augmented product is one that includes post-purchase services such as credit, service, delivery, installation, and warranties. - Explain the classifications of consumer and business-to-business
products.
If a product is purchased by a consumer for his or her household's own use, the product is classified as a consumer product (convenience, shopping, specialty, unsought). If a product is purchased by an organization to be used in producing other products or in operating its business, the product is classified as a business-to-business product, which is also referred to as an industrial (or non-consumer) product (installations, accessories, raw materials, component parts/materials, supplies, business to business services). - Distinguish between product mix and product line.
All of the products a company markets can be thought of as its product mix. A group of related items in a company's product portfolio constitutes a product line. - Explain what is meant by product mix width and product line depth.
The product mix width is the number of different product lines a company offers. The depth of the product lines includes the number of individual products within each line. - Explain the advantages of offering multiple product lines.
| Protection against competition. |
| Increase growth and profits. |
| Offset sales fluctuations. |
| Achieve greater impact. |
| Enable economic resource usage. |
| Avoid obsolescence. |
- Discuss the advantages of brand extension.
A successful brand name gives a new product a better chance for acceptance. - Describe the criteria for product elimination.
| not a positive contributor to company profits |
| no longer popular with consumers and sales are low |
| product is obsolete |
| too many company resources are being allocated |
- Understand the strategic decisions in creating the actual product.
| Branding Decisions |
| Brand Equity |
| Packaging Decisions |
| Product Quality Decisions |
- Explain the importance of various augmented product features.
| delivery |
| installation |
| after-sale service |
| warranty provisions |
- Describe the stages of the product life cycle.
| introduction (new product, low sales), |
| growth ( sales increase, competitors enter the market) |
| maturity (sales level off, lower prices due to increased competition, increase advertising expense) |
| decline (sales decrease, profits low) |
- Explain why companies need to continually develop new products.
| Without new products, a firm is risking long-term failure. |
- Describe the structures used for new product development.
| A new-product committee is the most common organizational structure for new product development. |
| Companies often create separate, formally organized new-product departments to oversee the planning and development of new products. |
| New-product committees and new-product departments can be combined to create cross-functional teams which remain intact after product introduction to run the new product as a fledgling business. |
| A venture team devotes its full-time efforts to an assigned project through the project's completion. The team possesses the authority for both planning and implementing courses of action to bring new products to fruition. |
| A product manager or brand manager is an individual within the marketing department assigned a brand or product line who has the responsibility to determine objectives and establish marketing strategies. |
- Discuss the six stages of the product life cycle.
| The objective of the idea-generation stage is to create a large number of good ideas, some of which ultimately will culminate in new-product introductions. |
| Screen the various ideas. |
| The business analysis is an assessment made on the new product's potential market, growth rate, compatibility with existing company promotional budgets, financial funding, production and distribution needs, and competitive strengths. |
| In the development stage, research and development personnel develop a prototype of the product, and production personnel analyze the feasibility of manufacturing the product. |
| Testing is conducted to determine consumer reactions to a product under normal marketplace conditions. |
| In the commercialization stage, a company prepares to rollout a new product, which now has the "green light," into select regional markets or to obtain national distribution as quickly as possible. |
- Discuss the diffusion process and its consumers.
The process by which new ideas, including new products, spread throughout a social system or marketplace is termed the diffusion process. Five categories of customers are typically identified in the diffusion process: innovators (first purchasers), early adopters (opinion leaders), early majority (information seekers), late majority (skeptics), and laggards (last to buy).
- Describe the rate-of-adoption determinants.
| relative advantage (superior product) |
| compatibility (consistent) |
| complexity (difficulty) |
| trialability (trial basis) |
| observability (visible) |
- Understand the process of product failure and elimination.
| Reasons products fail: bad timing, insignificant point of difference, poor quality, poor marketing execution, markets too small or inaccessible, lack of top-management commitment. Once a firm decides to eliminate a product from its line, an elimination plan must be developed. |
Answer the Discussion Questions.
- Many products could fall into different categories of the goods classification. How would you market a product as a shopping good and how would the marketing mix change for a specialty good?
- How is a product different if it is viewed as only a core benefit versus a total product concept?
Discuss potential criteria for a hypothetical company to use during each of the stages of the new product development process.
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