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7.6: Summary

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    The ability of the organization to consistently produce new products and effectively manage existing products looms as one of the most important and difficult tasks faced by the company. This chapter provides an overview of the components that constitute a product, and the product planning process.

    The process begins with the task of defining the product. In order to provide an accurate portrayal of the product, it is important to consider the perspective of the consumer, the manufacturer, and the various publics. All three perspectives must be understood and satisfied. In addition, the three components of the product are discussed. The core product identifies what the consumer expects when purchasing the product. The tangible product is reflected in its quality level, features, brand name, styling, and packaging. The augmented product is reflected by the services supporting the core/tangible product. The promised product suggests what the product delivers in the long term.

    There are also several classification schemes that are useful in improving our understanding of the product into three categories: convenience, shopping, and specialty. A convenience good is one that requires a minimum amount of effort on the part of the consumer. In contrast, consumers want to be able to compare products categorized as shopping goods. Specialty goods are so unique, at least from the perspective of the consumer, that they will go to great lengths to seek out and purchase them.

    Another relevant classification scheme has been applied to business goods. Three characteristics of business products are: (a) demand is derived from purchase of another product, (b) demand tends to be price-inelastic, and (c) tendency toward pure competition. Business products are classified as extractive products and manufactured products.

    Goods products versus service products is the final categorization. Although there is still controversy about the validity of this separation, we contend that the differences justify adjustments in the marketing strategy for service products. Services are intangible, require simultaneous production and consumption, cannot be easily standardized, and require high consumer involvement.

    This chapter continues with a discussion of the product planning process. Three elements were delineated: (a) the determination of product objective, (b) the identification and resolution of factors that have an impact on the product, and (c) the development of programs appropriate for that particular product. Examples of product objectives, as well as a discussion of the importance of product objectives, are provided. The third element of program development provides the basis for the two chapters that follow. The continuing development of successful new product looms as the most important factor in the survival of the firm. This chapter introduces the concept of a "new" product as well as the process of actually producing a new product.

    It is noted that what constitutes a new product must be appraised from both the consumer's point of view as well as that of the manufacturer. In the former case, newness is measured in respect to: (a) degree of consumption modification and (b) the extent of new task experience. The firm defines the product in terms of: (a) changes in the marketing mix, (b) modifications, (c) differentiation, and (d) diversification.

    New products can be acquired from several internal and external sources. The firm can employ basic research, applied research, and development to develop new products. Or they can use the external route: mergers and acquisitions, licenses and patents, and joint ventures.

    Key terms

    Product Anything, either tangible or intangible, offered by the firm as a solution to the needs and wants of the consumer, that is profitable or potentially profitable and meets the requirements of the various publics governing or influencing society.

    Consumer goods Products purchased for personal consumption with no intention of selling to others.

    Industrial goods Products purchased by an individual or organization in order to modify the product or distribute it for a profit.

    Packaging Provides protection, containment, communication, and utility for the product.

    Product lifecycle A product planning tool that parallels the stages of the human lifecycle.

    Brand Identifies the product and distinguishes it from competitors.

    Position A strategic management decision that determines the place a product should occupy in a given market.

    Questions

    ➢ What overriding objectives should be kept in mind when designing a product strategy?

    ➢ How do the strategies of market extension and market segmentation differ?

    ➢ Identify the steps a product manager should take in deciding positioning of a product.

    ➢ In what kind of market situation will a strategy of product differentiation be most effective?

    ➢ What are the four product mix strategies discussed in the chapter? Name three reasons why a company might decide to alter its product mix.

    ➢ What factors would impact a marketing manager's decision to engage in a temporary or permanent price change for a mature product?

    ➢ How would you define the term "product"? Differentiate between the points of view of the manufacturer and the customer.

    ➢ Distinguish between convenience goods, shopping goods, and specialty goods. Can you think of examples that belong in each category, other than those discussed in the chapter?

    ➢ Compare and contrast the consumer's view and the firm's view of a new product.

    ➢ Describe the steps in the new product development process. Are all these steps necessary?

    ➢ How do organizations identify product objectives when developing a product strategy? Why are these objectives important?

    ➢ What impact do market trends have on new product development? How do organizations decide whether to introduce a new product or extend an existing product line?

    ➢ How does the media react to new products like Apple's iMac? What about product failures like Coca-Cola's New Coke? Use the Interactive Journal to find articles about these companies and products.

    ➢ What type of innovation is Hershey chocolate milk?

    ➢ How would you describe the product development process Hershey followed?

    ➢ Describe any potential problems.

    Project

    Identify a product that you feel is in the maturity or decline stage. Determine the characteristics of this product in light of the discussion throughout this chapter. Write a three to five page analysis.

    Case application

    Hershey chocolate milk

    Hershey Foods Corporation is making an unusual move in using national TV advertising for its chocolate milk, a product that historically has not received much ad support. The national TV commercial, which first aired in June 1983, was shot in 12 weeks in London by Clearwater Productions. Doyle Dane Bernbach (DDB) in New York developed the commercial, which has been shown nationally on a children's network and in the early fringe time period.

    "The commercial's creative; it's aggressive. It breaks one cardinal rule by not mentioning this new product until 75 per cent into the commercial. But the commercial works. We think its unique", says Bob Jeffery, DDB VP account supervisor. He admits that the Hershey packaging also has had an important consumer impact. "The carton practically screams chocolate."

    According to Hershey sales figures, Hershey chocolate milk is the number-one chocolate milk in the country. These results are indeed admirable considering the gamble Hershey took with their chocolate milk. It was the first time Hershey had attempted to sell a premixed beverage or promote a product not under its direct control. Hershey is licensing the use of its name on the chocolate milk another big first for the company. Hershey sells powdered chocolate to large dairies which mix the product with their milk, package it, and handle distribution. Following strict standards, Hershey has selected only certain dairies to be licensed to use the Hershey chocolate powder and label. Each dairy must follow detailed specification on mixing. To make sure there are no slip-ups, Hershey has printed a toll-free telephone number for consumers to call if they have complaints about the chocolate milk.

    For Hershey, the taste of success is sweet.

    References

    1L.P. Bucklin, "Retail Strategy and the Classification of Consumer Goods," Journal of Marketing, January 1963, pp. 53-54.

    2Robert G. Cooper, 1992. "New Product Success in Industrial Firms," Industrial Marketing Management, pp. 2.15-223.

    3Leonard L. Berry, "Services Marketing Is Different," Business Magazine, May-June 1980, pp. 19-28.

    4Brian O'Reilly, 1997. "New Ideas, New Products," Fortune, March 3, 1999, pp. 61-64.

    5Joel Dean, Managerial Economics, Englewood Cliffs, ]"J: Prentice Hall, Inc. , 1951, pp. 411-412.

    6Robert J. Kelsey. "The Process of Innovation and Diffusion of Innovation," Journal of Marketing, January 1978, pp. 14-19.

    7Patrick Oster, "The Erosion of Brand Loyalty," Business Week, July 19, 1993,p.22.Stephanie Thompson,"Brand Buddies," Brandweek, February 23, 1998. pp. 22-30.

    8David A. Aaker and J. Gary Shansby, "Positioning Your Product," Business Horizons, .Vlay-June 1982, pp. 56-62.

    9Robert G. Cooper and Elko J. Kleinschmidt, New Product: The Key Factors to Success, Chicago: American Marketing Association, 1990.

    10Thomas Robertson, "The Process of Innovation and Diffusion of Innovation," Journal of Marketing, January 1967, pp. 14-19.

    11Eberhard Scheming, New Product Management, Hinsdale, IL: The Dryden Press, 1974.

    12Pam Weise, "Getting Hot New ideas from Customers," Fortune, May 19, 1992,pp. 86-87.

    13Abbie Griffin, "PDMA Research on New Product Development Practices: Updating Trends and Benchmarking Best Practices," Journal of Product Innovation Management, Vol. 14, November 1997, pp. 429-458.