Product:-
A product is a set of tangible
and intangible attributes which may include, packaging,color, price, and
quality, brand, and seller reputation and seller services.The first commandant
in marketing is the customer and the second is the product. Innarrow sense
product is the product is set of basic attributes assembled in an
identified form.Each product is identified by a commonly understood descriptive
name, such as steel, insurance,tennis rackets etc.
There are many definitions of
product by different authors.1-
A product is a set of tangible
and intangible attributes, which may include packaging,color, price,
quality, brand and seller’s services and reputations.2-
Product is a service that
provides the benefit of a comfortable night rest at a
reasonable price.3-
Product is a place
that provides sun and sand, relaxation, romance, cross culturalexperiences
and other benefits.
Explanation:-
We treat each brand as separate
product. Any change in a feature (design, color, size, packing) however
minor, creates another product. Each such change provides the seller with
anopportunity to use a new product. A product may be a good, service,
place, person or idea.Customers buy products to satisfy their needs.
Classification
of product:-
Products or goods are basically
of two types.(1). Consumer goods(2).Industrial goods.
(1).
Consumer goods:-
Consumer products are
produced for personal consumption by households. There are four types
of consumer goods.
(1).
Convenience goods:-
Goods that the consumer usually
purchase frequently, immediately, and with theminimum of effort in comparison
and buying for most buyers, convenience goods include manyfood items,
inexpensive candy, drugs like aspirin and tooth paste, hardware items such
as light bulbs and batteries. Convenience goods have low price an
are not greatly affected by fad andfashion. A manufacturer prepares
these products to distribute it widely and rapidly.
(2)
Shopping goods:-
A tangible product for which a
consumer wants to compare quality, price and perhapsstyle in several stores
before making a purchase is known as shopping goods. Examples of shopping
are furniture, automobiles, major appliance etc. The process of searching
andcomparing continues as long as consumer feels satisfaction. The shopping
goods can be dividedinto homogeneous and heterogeneous goods. The homogeneous
goods are similar in quality butdifferent in price. The heterogeneous products
are different in quality and prices.
(3)
Specialty goods:-
A tangible product for which a
customer give preference to a strong brand and he wantsto expend
substantial time and effort in locating the desire brand is called a specialty
good.Examples of specialty goods are men’s suits, stereo sound equipment,
health foods, photographequipment, new automobiles and certain home appliances.
The specialty goods do no involve the buyer’s making comparisons, the
buyer only invest time to reach the dealers carrying the wanted products.
(4)
Unsought goods:-
An unsought good is a new
product from which a consumer is not aware. More peopleare unaware of
interactive movies. An electric car might be an unsought good for most
people, because they are unaware of it. Bathroom tissue made strictly
from cotton fiber would seem to be
an unsought good. A firm
faces a very difficult, perhaps impossible advertising when trying
tomarket unsought goods. Marketers market unsought goods by placing
ads on bus-stop benchesor in church buildings.
(b).
Industrial goods/Business goods:-
Industrial products are
purchased to produce other products or for use in a firm’soperations.
Industrial products are purchased on the basis of organization’s goals and
objectives.On the basis of their uses and characteristics, industrial or
business products can be classifiedinto seven categories.
1).Raw
material:-
Raw materials are the basic
materials that actually become part of the product. They are provided form
mines, forests, oceans, farms and recycled solid wastes.
2).Fabricating
Materials and parts/Capital items:-
Major equipment includes large tools
and machines used for production purposes.Examples are rather, cranes,
Stamping machines.
3).
Accessory Equipment:-
Accessory equipment does not
become part of the final product but is used in productionor office activities.
Examples include, hand tools, type writers, fractional horse power motors
etc.Accessory equipments are less expensive than capital items.
4).Component
Parts:-
Component parts become a
part if the physical product and either are finished items readyfor
assembly or are products that enter the finished product completely with
no further change inform, as when small motors are put into vacuum
cleaners and tires are added on automobiles.Spark plugs, tires, clocks and
switches are all component parts of the automobile.
5).Process
material:-
Process materials are used
directly in the production of other products. Unlike component parts,
however process materials are not identifiable process materials are further
fabricated. For example, Pig iron is made into steal and Yarn is woven into
cloth.
6).Supplies:-
Supplies facilitate
productions, but they do not become part of he finished product.
Paper, pencils, oils, cleaning agents and paints are examples.
7).Industrial
Services:-
Industrial services include
maintenance and repair services. (e.g.; window cleaning,typewriter repair) and
business advisory services. (e.g.; legal, management, consulting,advertising,
marketing research services). These services can be obtained internally as
well asexternally.
Product innovation & Importance of product
innovation
The main purpose of business is
to satisfy customers and to make profit fundamentally; acompany
fulfills this purpose through its products. New product planning and
development arevery important for an organization’s success. The new products
must satisfy customers need aswell as must
be profitable for the firm.
Requirement
for growth:-
Sooner or later, many products
brands become outdated. Their sales volumes and marketshares drop because of
changing desires or superior competing products.
Examples
of outdated products:-
⇒
Once successful products that
are now become outdated include fountain pen, audiocassettes.
Now many dated products are
becoming successful rapidly for example, white cloud bathroom tissue,
computers, etc.Thus the guideline for management is innovating or die.
Introduction a new product at the righttime can help sustain a firm.
In fact, companies that are leaders in terms of profitability and
salesgrowth obtain 39% of their revenues from new products.Some firms that were
successful innovators for long periods like Nike, Procter andGamble, haven’t
maintained a steady flow of new products in recent years. Some of
their competitors have been more successful. Business profitability and
success depends oninnovation. IF we innovate well, we will ultimately win.
High
Failure Rates:-
For many years, “the rule of
thumb” has been that about 80% of new product fail. New products
higher failure rate is due to no change in existing products or new products
are not being different that existing products. For
example, Vaseline after shave lotion, Pepsi A.M, andFarrah Shampoo. A new
product is also fail if it does not deliver on its promise. Further,
a product can be failed if it is perceived as offering poor value in
relation to its price. Other factorsthat can undermine new products include
poor positioning and lack of marketing support.Firms that are inattentive to
their new products can face higher failures. Firms andorganizations that
effectively manage product innovation can get higher advantage,
higher salesand profits and solid foundation for the future.
Planning and development of a new
product
NEW PRODUCT
There are several possible
categories of new products. Each separate category mayrequire quite a
separate marketing programmed to ensure a reasonable probability of
marketsuccess.Three considerable categories of new products are:-
1)
Products which are really innovative:-
Truly unique, e.g., a
hour restores, cancer cure products for which there is a real used but
for which no existing substitutes are considered satisfactory. In this
case we also includes productthat are quite different from existing product but
satisfy the same need.
2)
Replacement for existing products:-
That are significantly
different from existing goods. Annual model, change automobiles and newfashions
in clothing, belong to this category.
3)
Imitative Product:-
That are new to a
particular company but not new to market, with a “me-too” product.
Perhapsthe key criterion as to whether a given product is new is how to
intend market perceives it. If a buyer perceives a product is
significantly different from competitive goods in somecharacteristics then it
is a new product.
Reasons of failure of new
product:-
·
The new product fails due
to certain reasons in market.
·
The idea is good, but market
size is overestimated..
·
The product is
not well-designed..
·
The product is incorrectly
positioned in market, no advertised effectively and over- priced..
·
The product fails to gain sufficient
distribution coverage or support..
·
Development costs are higher
than expected..
·
Competitors fight back harder
than expected.
Organizing
new product development:-
Companies handle organizational
aspects of new product development in several ways.Many companies assigned
responsibility for new product ideas to product manager. But
productmanagers are often busy in managing existing lines that they give
little time and effort to new products other than line extensions.
They also lack specific skills and knowledge needed todevelop and critique
new product.
New Product Strategy:-
A new product strategy is
a statement identifying the role of new product is expected to play in
achieving corporate and marketing goals. New product development
process
Stages:-
A new product is best
developed through a series of eight stages.As compared to unstructured
development the formal development of new product provides benefits
such as improved team work, lesser work, earlier failure detection and most
importanthigher success rate.
1).Idea
generation:-
The new product Development
process with the search for ideas. New product ideascomes through interacting
with various group of people , such as customer, scientists,competitors ,
employees and top management. Companies can also find good ideas by
searchingcompetitor’s products and services. From this they can find
out what the customers likes anddislike about competitors products. They
can buy their competitors products, take them a partand build better ones. Many
companies also encourage employees particularly those on production line
to come forth with ideas, often offering cash reward for good suggestion.
New product ideas also come from inventors, university and commercial
laboratories, advertisingagencies. As the ideas start to flow, one will
sprat another, and within a short time hundred of new ideas may be brought
to surface.
2)
Idea screening: -
Idea screening is second stage
in new product development once a large pool of ideas has been generated
by what ever their means, their number have to be pruned to manageable level.
Inscreening ideas the company must avoid two types of error.
Drop
error: -
Occurs when the company
dismisses an otherwise good idea.
Go
error: -
Mean adoption of poor ideas
The purpose of screening is
to drop poor ideas as early as possible. Many companiesrequire their
executives to write up new product on a standard form that can be received
by anew product committee. The write up describes product idea, target
market and competition. Itmakes some rough estimate of market size,
product price, development cost and rate of return.
3) Concept development and testing: -
A product idea is possible
product the company might offer to the market. A productconcept is an
elaborated version of ideas expressed in a meaningful consumer terms.
Throughoutthe stages of idea generation and screening, the developers are
only with the product idea,general concept of what product might
be.Concept development involves many questions:i) Who will buy the new product?ii)
What is the primary benefit of new product?iii) Under what circumstances, the
new product may be used?
Concept testing:-
Concept testing involves
presenting the product concept to appropriate target consumersand getting
their reactions.
4) Marketing Strategy: -
Following the successful
concept test, the new product manager will develop a preliminary marketing
strategy plan for introducing the new product into market. The
planconsists of three parts. The first part describes the target market size,
structure and behavior, the planned product positioning and sales, market
share, profit goals sought in the first few years.The second part outlines
the planned price, distribution strategy and marketing budget for first year.The third part of marketing
strategy plan describes the long run sales and profit goals andmarketing
strategy overtime.
5)
Business Analysis: -
The next step in new
product development is business analysis. The market must
project costs, profit and return on investment for the new product if
it were placed in market.Business analysis is not a short process; it is a
detailed realistic projection of bothmaximum and minimum sales and their impact
on economy or company. For some productssuch as another candy
bar, marketers can use existing sales data to guide themselves.
But with a product, for which sales data does not exist, only
estimation can be used.
6) Product Development: -
If the result of business
analysis is favorable then a prototype of the product is developedIn
development stage, the idea is given in a concrete or tangible form. Up to now,
the product as existed only a word description, a drawing or a prototype.
This step involves a largeinvestment. The company will determine whether the
product idea can be translated into atechnically and commercially feasible
product.
7) Test marketing: -
After management is satisfied
with functional and psychological performance, the product is ready to be
dressed up with a brand name and packaging and put into a market test.Test
marketing involves how large the market is and how consumers and dealers
react tohandling, using and repurchasing the product.The amount of
test marketing is influenced by investment cost and risk on one hand
andtime pressure and research cost on the other.
8) Commercialization: -
As the company goes ahead with
commercialization, it will face its large gest costs todate. The company will
have to contract for manufacturing facility. Another major cost ismarketing
Example:-
To introduce a major new
consumer packaged good into the national market, thecompany may have
to spend b/w $20 million and $80 million in advertising and promotion in
thefirst year. In the introduction of new food products, marketing
expenditures typically represents57% of sales during the first year
A product life cycle consists
of the aggregate demand over an extended period of time for all brands
comprising a generic product category. A product life cycle can be graphed
by plottingaggregate sales volume for a product category over a time,
usually years. It is also worthwhile toaccompany the sales volume curve with
the corresponding profit curve for the product category.As shown in the
figure 9.2After all a business in interested in profit not in just sales.
The shape of these two curves variesfrom one product category
to another. Still for most categories, the basic shape of the relationship
between the sales and the profit curves are illustrated in figure 9.2. In this
typical life cyclethe profit curve for most new product is negative, satisfying
a loss, through much of introductorystages. In the later part of growth
stage, the profit curve starts to decline while the sales volumeis still
rising. Profit declines because the companies in an industry usually must
increase their
advertising and selling efforts
or cut their prices to sustain sales growth in the face
of intensifying competition during the maturity stage.The product life
cycle consist of four stages
1)
Introduction:-
During introduction stage, some
times called pioneering stage, a product is launched intothe market in
a full scale of marketing program. It has gone through
product development,including idea screening, prototype, and market test.
The entire product may be new, such as thezipper, the video cassette
recorder, etc for a new product there is very little competition.However, if
the product has tremendous promise, numerous companies may enter into
theindustry early on. That has occurred with digital TV, introduced in 1988.Introduction
is the most risky and expensive stage because substantial dollars must
bespent not only to develop the product but also to seek consumer acceptance of
the offering.
2)
Growth:-
In the growth stage on
market acceptance stage, sales and profit rise frequently at a rapid
rate.Competitors enter the market, often in large number if the profit
outlook is particularly attractive.Mostly as a result of competition profit
start to decline nears the end of the growth stage.As a part of firm’s efforts
to build sales and in turn, market share, prices typically
declinegradually during this stage. ‘’The only thin that matters is if the
exponential growth of your market is faster then the exponential decline
of your prices’’
Maturity:-
During the first part of the
maturity stag, sales continue to increase, but at a decreasing rate.When
sales level off, profits of both producers and middle-man decline. The
primary reasonincrease price competition. Some firms extends their product
lines with new models, other comeup with a new improved version of their
primary brand. During the later part of this stagemarginal producers those with
high cost or no differentiate advantage drop out to the market.They do so
because the lack sufficient customers or profit.
Decline:-
For most products a decline
stage, as gauged by sales volume for the total category is inevitablefor
one of the following reason.
A better or less expensive
product is developed to fill the same need.
The need for product
disappears, often because of other product development.
People simply grow tired of a
product so disappear from the market.
Length
of product life cycle:
The length of
product life cycle from the start of introduction stage to the end of
decline stagevaries across the product categories. It ranges from a few
weeks or a short season ( for a clothingfashion) to many decades ( for
autos or telephones). And it varies because of differences in thelength of
individual stages from one product category to the next.
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