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Chapter 5 ppt

The document discusses the principles of marketing, focusing on the concept of product, its levels, classifications, and the new product development process. It outlines the reasons for new product failures and strategies for successful product development, including understanding customer needs and effective marketing strategies at different stages of the product lifecycle. Additionally, it categorizes target markets based on their adoption behavior towards new products.

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Bikila Mitiku
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21 views21 pages

Chapter 5 ppt

The document discusses the principles of marketing, focusing on the concept of product, its levels, classifications, and the new product development process. It outlines the reasons for new product failures and strategies for successful product development, including understanding customer needs and effective marketing strategies at different stages of the product lifecycle. Additionally, it categorizes target markets based on their adoption behavior towards new products.

Uploaded by

Bikila Mitiku
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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AMBO UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS


Department of Marketing Management

Course title: Principles of Marketing

December 2021
Ambo, Ethiopia
CHAPTER 5

Product
5.1. What is
product?
 Product is anything that offered to a market for
attention, acquisition, use, or consumption that
might satisfy a want or need.
 It is a bundle of physical and intangible attributes

that have the potential to satisfy present and


potential customer wants.
5.2. LEVELS OF PRODUCT
Products have five levels.
Level 1 Core benefit: It is the fundamental level of
a product that customer is really buying
Level 2 Basic product: It is product parts that
deliver the core benefits
Level 3 Expected product: It is a set of attributes
and conditions that buyers normally expect when
they purchase this product
Level 4 Augmented product: At this stage the
competition is around after sales service,
warranties, delivery and so on
Level 5 Potential product: Encompasses all the
possible augmentations and transformations the
product or offering might undergo in the future.
5.3. CLASSIFICATION OF PRODUCT

I. Product Classification Based on Tangibility and


Intangibility
A. Durable goods: Durable goods are tangible
goods that normally survive for many years
B. Non-durable goods: None-durable goods
are tangible goods that normally consumed
in one or a few uses.
C. Services: It is any act or performance that
one party can offer to another that is
essentially intangible and does not result in
the ownership of anything
II. Product Classification Based on use
a. Consumer product Classification

Consumer products are products bought by final


consumers for personal consumption.
 Convenience product

 consumer products that customers usually buy

frequently, immediately, and with minimal


comparison and buying effort
 Shopping product

 They are less frequently purchased consumer

products that customers compare carefully on


suitability, quality, price, and style
 Specialty product
 are consumer products and services with unique

characteristics or brand identification for which a


significant group of buyers is willing to make a
special purchase effort
 Unsought product

 They are consumer goods that the consumer either

does not know about or knows about but does not


normally think of buying. E.g. funeral services,
encyclopaedias, fire extinguishers and reference
books.
b. Industrial product classification
 Industrial products are those products purchased for

further processing or for use in conducting a


business
 Materials and parts

 They are goods that enter the manufacturer’s

product completely. They fall into two classes: raw


materials and manufactured materials and parts.
 Capital items

 long-lasting goods that facilitate developing or

managing the finished product.


 Supplies and business service

 Supplies and services are short-lasting goods and

services that facilitate developing or managing the


finished product
5.4. NEW PRODUCTS
 It is development of original products, product
modification, and new brands that the firm develops
through its own research and development efforts.
 A firm can obtain new products in two ways.

 One is through acquisition

by buying a whole company, a patent, or a license to


produce someone else's product
o through new product development

company's own research and development


department
WHY DO NEW PRODUCTS
FAIL?
There are several reasons for the failure of new
products
 The idea may be good, but the company may

overestimate market size


 The actual product may be poorly designed

 The product might be incorrectly positioned,

launched at the wrong time, priced too high, or


poorly advertised
 A high-level executive might push a favourite idea

despite poor marketing research findings


 Sometimes the costs of product development are

higher than expected


 Sometimes competitors fight back harder than

expected
WHAT CAN A COMPANY DO TO DEVELOP
SUCCESSFUL NEW PRODUCTS?

a better understanding of customer


needs;
 a higher performance-to-cost ratio;

 a head-start in introducing the product

before competitors;
 a higher expected contribution margin;

 a higher budget for promoting and

launching the product; more use of


cross-functional teamwork; and
stronger top-management support
5.4.1. NEW PRODUCT DEVELOPMENT PROCESS

1. Idea generation
 Idea generation is the systematic search for new

product ideas.
 Major sources of new-product ideas include internal

sources and external sources


2. Idea screening
o It helps to spot good ideas and drop poor ones as soon

as possible
3. Concept development and testing
 Concept development: it is development of product

idea
 Concept testing: presenting the product concept to

appropriate target consumers to find out if the


concepts have strong consumer appeal and getting
their reactions
4. Marketing strategy development
 The plan consists of three parts

 The first part describes the target market’s size,

structure, and behavior, positioning, sales, etc


 second part outlines the planned price,

distribution strategy, and market budget for the


first year
 The third part of the marketing strategy plan

describes the long-run sales and profit goals and


marketing mix strategy over time
5. Business analysis
 involves a review of the sales, costs, and profit

projections for a new product to find out whether


they satisfy the company’s objectives
 It can evaluate the proposal’s business

attractiveness
6. PRODUCT DEVELOPMENT
 It is stage in which companies develop the
product concept into a physical product to
ensure that the product idea can be turned
into a workable market offering.

7. TEST MARKETING

 Test marketing is the stage at which the


product and its proposed marketing program
are introduced into realistic market settings
 Test marketing gives the marketer

experience with marketing a product before


going to the great expense of full
introduction.
8. COMMERCIALIZATION

 Commercialization is introducing a new


product into the market
 markets fully promote, distribute, and sell

their new products


 The company launching a new product must

first decide on introduction timing. And


where to launch the new product
5.4.2. PRODUCT LIFECYCLE STAGE

 Product life cycle is the course of a product’s


sales and profits over its lifetime.
 It involves four distinct stages

1. Introduction stage
o It is the PLC stage in which a new product is

first distributed and made available for


purchase.
o Introduction takes time, and sales growth is

to be slow
o profits are negative or low because of the low

sales and high distribution and promotion


expenses
…

Marketing strategies marketers may use at


introduction stage:
 Rapid skimming strategy: It involves launching

the new product with a high price and high


promotion spending
 Slow skimming strategy: It involves launching

the new product with a high price and low


promotion spending
 Rapid penetration strategy: A company might

introduce its new product with a low price and


heavy promotion spending
 Slow penetration strategy: A company might

introduce its new product with a low price and low


promotion spending
2. GROWTH STAGE

 the PLC stage in which a product’s sales start


climbing quickly.
 It is a period of rapid market acceptance and

increasing profits
Marketing strategies marketers may use
at growth stage:
 Improves product quality and adds new

product features and models


 Enters new market segments and new

distribution channels
 Lowers prices at the right time to attract

more buyers
3. MATURITY STAGE
 It is the PLC stage in which a product’s sales growth
slows or levels off
 It is slowdown in sales growth because the product has

achieved acceptance by most potential buyers


Marketing strategies marketers may use at
maturity stage
 Modifying the market: company tries to increase

consumption by finding new users and new market


segments for its brands
 Modifying the product: changing product

characteristics such as quality, features, style, or


packaging to attract new users and inspire more usage.
 Modifying the marketing mix: modifying marketing-

mix elements such as prices, distribution, advertising,


sales promotion, personal selling, and services.
4. DECLINE STAGE
 Decline stage is the PLC stage in which a product’s
sales decline
 eventually decline for a number of reasons,

including technological advances, shifts in


consumer tastes, and increased domestic and
foreign competition
 Marketing strategies marketers may use at

decline stage
 Increasing the firm’s investment

 Maintaining the firm’s investment level until the

uncertainties about the industry are resolved;


 Decreasing the firm’s investment level selectively
5.4.3. TARGET MARKET ASSESSMENT FOR NEW PRODUCTS

 Target market is the group of potential customers selected


for marketing
 Different classes of prospects are grouped into five groups
 Innovators: are those who are prepared to take risks and
like having new products simply because they are new
 Early adopters: they are opinion leaders in their
community and adopt new ideas early but carefully
 Early majority: is deliberate: although they are rarely
leaders, they adopt new ideas before the average person.

 Late majority: they adopt an innovation only after most


people have tried it.
 Laggards: they are suspicious of changes and adopt the
innovation only when it has become something of a
tradition itself

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