Scenario: You currently work as the marketing manager of your favorite company/organization and manage the success of one of its products or services. Your responsibility is to monitor the stages of the Product Life Cycle (PLC) and adjust the marketing strategies as needed for your product so that it can thrive for as long as possible. At each stage, you assess changes in the target market, determine changes that you need to make to the product or price strategy, and review the competition and profitability.Create a 10- to 15-slide (not counting cover slide or reference slide) Microsoft® PowerPoint®, Prezi, or Microsoft® Sway® presentation with speaker’s notes that covers the following criteria:Develop a slide that establishes the theme and goals of the presentation.Define and discuss the PLC concept and its importance to marketing managers.Discuss why the PLC is important to marketing managers, and provide examples of the possible implications if the PLC is not monitored.Describe the selected company/organization, product/service, the target market for this product, and how the product/service is presented to the selected target market.Describe how brand equity can be used to create a positive customer image of your product.Describe each stage of the PLC, and analyze the implications that each stage may have on pricing, product definition, competition, and profitability for your selected product/service.
marketing_by_roger_kerin__ch_10.docx
marketing_by_roger_kerin__ch_11.docx
Unformatted Attachment Preview
LEARNING OBJECTIVES
After reading this chapter you should be able to:
1.
LO 10-1
Recognize the various terms that pertain to products and services.
2.
LO 10-2
Identify the ways in which consumer and business products and services can be
classified.
3.
LO 10-3
Explain the significance of “newness” in new products and services as it relates to the
degree of consumer learning involved.
4.
LO 10-4
Describe the factors contributing to the success or failure of a new product or service.
5.
LO 10-5
Explain the purposes of each step of the new-product development process.
Apple: The World-Class New-Product Machine
How does a company become the most admired and financially valuable organization in the world? Just
look to Apple Inc. and its legendary product innovations that have touched the lives of people on every
continent for 40 years.
Apple’s New-Product Development Successes …
Apple’s new-product successes, orchestrated by its late co-founder, Steve Jobs, revolutionized five
different industries: personal computing, music, smartphones, tablet computing, and digital publishing. A
sampling of Apple’s market-changing innovations includes:
• Apple II—the first commercial personal computer (1977).
• Macintosh—the first personal computer with a mouse and a graphical user interface (1984).
• iPod—the first and most successful MP3 music player (2001).
•
•
•
iPhone—the world’s best multi-touch smartphone and media player with almost 1 million apps
(2007).
iPad (2010) and iPad mini (2012)—the thin tablet devices that allow users to read books,
newspapers, magazines, and even textbooks.
CarPlay—a device that allows you to use your iPhone while driving your car to make calls, listen to
music, and access messages by voice or touch (2014).
… and New-Product Development Stumbles
But Apple has stumbled at times too in its relentless pursuit of innovation. Examples of notable failures
are:
• Apple III (1980) and Apple Lisa (1983)—two products intended for business users failed due to
design flaws. Each product was discontinued four years after introduction.
• Apple Newton (1987)—a personal digital assistant (PDA) that featured handwriting recognition
software. Newton was discontinued 10 years later because of its limited battery life and hard-to-read
screen.
• Macintosh Portable (1989)—Apple’s first attempt to create a battery-powered portable computer. Its
high price coupled with an “un-portable” weight of 16 pounds led to its demise two years later.
• “Hockey Puck” Mouse (1998)—the first commercially released Apple Mouse to use a USB
connection. The mouse’s round shape made it difficult to hold and use. It was discontinued in 2000.
© Stephen Lam/Getty Images
Page 265
These examples illustrate that new-product development is a challenge, even for Apple. Apple learned
from each stumble and applied valuable insights from failure to produce subsequent successes. In short,
when a new-product development effort fails, Apple fails wisely. For example, the Macintosh was born
from the failure of Apple Lisa. Apple’s iPhone was a direct result of Apple’s failed original music phone,
produced in conjunction with Motorola.
The Next Chapter in Apple’s Story: Apple Watch
In 2015, Apple introduced the Apple Watch, the most advanced piece of wearable technology in the
marketplace. Apple Watch is the company’s first all-new product since the iPad in 2010. According to Tim
Cook, Apple’s chief executive officer and hand-picked successor to Steve Jobs, “The Apple Watch is the
next chapter in Apple’s story,” adding that it is “the most personal device we have ever created.” The
Apple Watch is positioned as a jack-of-all-trades, capable of tracking activity, delivering and receiving
messages, reminding users of appointments, and creating a platform for new Apple software and
services. And yes, an Apple Watch will also give its user the time of day across the country or around the
globe. With prices starting at $349 and climbing to $17,000 for a gold-encased model, Apple Watch is
viewed as a must-have smartwatch and a bona fide luxury item. Will Apple Watch achieve the success of
so many earlier innovations? Only time will tell.
The life of an organization depends on how it conceives, produces, and markets new products and
services. This chapter describes the nature of products and services, highlights why new products
succeed or fail, and details the new-product development process. Chapter 11 will discuss how
organizations manage existing products, services, and brands.1
Page 266
WHAT ARE PRODUCTS AND SERVICES?
The essence of marketing is in developing products and services to meet buyer needs. A product is a
good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers’
needs and is received in exchange for money or something else of value. Let’s clarify the meanings of
goods, services, and ideas.
LO 10-1
Recognize the various terms that pertain to products and services.
A Look at Goods, Services, and Ideas
A good has tangible attributes that a consumer’s five senses can perceive. For example, the Apple Watch
can be touched and its features can be seen and heard. A good also may have intangible attributes
consisting of its delivery or warranties and embody more abstract concepts, such as becoming healthier
or wealthier. Goods also can be divided into nondurable goods and durable goods. A nondurable good is
an item consumed in one or a few uses, such as food products and fuel. A durable good is one that
usually lasts over many uses, such as appliances, cars, and smartphones. This classification method also
provides direction for marketing actions. For example, nondurable goods, such as Wrigley’s gum, rely
heavily on consumer advertising. In contrast, costly durable goods, such as cars, generally emphasize
personal selling.
Services are intangible activities or benefits that an organization provides to satisfy consumers’ needs in
exchange for money or something else of value. Services have become a significant part of the U.S.
economy, and often augment products. For example, a product is Apple’s iPhone 6 and iPhone 6 Plus,
and Verizon is a wireless network.
Nondurable goods like chewing gum are easily consumed and rely on consumer advertising.
© Mike Hruby
Finally, in marketing, an idea is a thought that leads to a product or action, such as a concept for a new
invention or getting people out to vote.
Throughout this book, product generally includes not only physical goods but services and ideas as well.
When product is used in its narrower meaning of “goods,” it should be clear from the example or
sentence.
Classifying Products
Two broad categories of products widely used in marketing relate to the type of user. Consumer
products are products purchased by the ultimate consumer, whereas business products (also
called B2B products or industrial products) are products organizations buy that assist in providing other
products for resale. Some products can be considered both consumer and business items. For example,
an Apple iMac computer can be sold to consumers for personal use or to business firms for office use.
Each classification results in different marketing actions. Viewed as a consumer product, the iMac would
be sold through Apple’s retail stores or directly from its online store. As a business product, an Apple
salesperson might contact a firm’s purchasing department directly and offer discounts for large volume
purchases.
LO 10-2
Identify the ways in which consumer and business products and services can be classified.
Consumer Products The four types of consumer products shown in Figure 10-1 differ in terms of (1)
the effort the consumer spends on the decision, (2) the attributes used in making the purchase decision,
and (3) the frequency of purchase. Convenience products are items that the consumer purchases
frequently, conveniently, and with a minimum of shopping effort. Shopping products are items for which
the consumer compares several alternatives on criteria such as price, quality, or style. Specialty
productsare items that the consumer makes a special effort to search out and buy. Unsought
products are items that the consumer does not know about or knows about but does not initially want.
FIGURE 10-1How a consumer product is classified significantly affects which products consumers buy and
the marketing strategies used.
Figure 10-1 shows how each type of consumer product stresses different marketing mix actions, degrees
of brand loyalty, and shopping effort. But how a consumer product is classified depends on the individual.
One consumer may view a camera as a shopping product and visit several stores before deciding on a
brand, whereas another consumer may view a camera as a specialty product and make a special effort to
buy only a Nikon.
Page 267
Business Products A major characteristic of business products is that their sales are often the result
of derived demand; that is, sales of business products frequently result (or are derived) from the sale of
consumer products. For example, as consumer demand for Ford cars (a consumer product) increases,
the company may increase its demand for paint spraying equipment (a business product).
Business products may be classified as components or support products. Components are items that
become part of the final product. These include raw materials such as lumber, as well as assemblies such
as a Ford car engine. Support products are items used to assist in producing other products and services.
These include:
• Installations, such as buildings and fixed equipment.
• Accessory equipment, such as tools and office equipment.
• Supplies, such as stationery, paper clips, and brooms.
• Industrial services, such as maintenance, repair, and legal services.
Strategies to market business products reflect both the complexities of the product involved (paper clips
versus private jets) and the buy-class situations discussed in Chapter 6.
Classifying Services
Services can be classified according to whether they are delivered by (1) people or equipment, (2)
business firms or nonprofit organizations, or (3) government agencies. These classifications are more
thoroughly discussed in Chapter 12.
Page 268
Product Classes, Forms, Items, Lines, and Mixes
Most organizations offer a range of products and services to consumers. Each set of offerings can be
categorized according to the product class or industry to which they belong, like the iPad, which is
classified as a tablet device. Products can exist in various product forms within a product class
(see Chapters 2 and 11). A product item is a specific product that has a unique brand, size, or price. For
example, Ultra Downy softener for clothes comes in different forms (liquid for the washer and sheets for
the dryer) and load sizes (40, 60, etc.). Each of the different product items represents a separate stock
keeping unit (SKU), which is a unique identification number that defines an item for ordering or inventory
purposes.
Video 10-1
Crapola
kerin.tv/13e/v10-1
A product line is a group of product or service items that are closely related because they satisfy a class
of needs, are used together, are sold to the same customer group, are distributed through the same
outlets, or fall within a given price range. Nike’s product lines include shoes and clothing, whereas the
Mayo Clinic’s service lines consist of inpatient hospital care and outpatient physician services. Each
product line has its own marketing strategy.
The “Crapola Granola” product line started as an edgy party joke from Brian and Andrea Strom, owners of
tiny Brainstorm Bakery.2 The dried CRanberries and APples granOLA—hence the “Crapola” name—also
contains nuts and five organic grains sweetened with maple syrup and honey. Its package promises that
Crapola “Makes Even Weird People Regular.”
What company cheerfully tells its customers to “Have a crappy day”? Read the text to find out about this “tasty”
offering!
Source: Brainstorm Bakery
Crapola is sold in retail outlets in the Midwest, California, and Oregon as well as online
at www.crapola.us. The Stroms have a strategy of developing Crapola into a broader product line.
Currently, they offer three other recipes: “Number Two,” Colonial Times, and Kissypoo. These product
line extensions enable both consumers and retailers to simplify their buying decisions. So if a family has a
good experience with Crapola, it might buy another product in the line. With a more extensive product
line, the Stroms may manage to obtain distribution and shelf space in supermarket chains, which strive to
increase efficiencies by dealing with fewer suppliers.
Many firms offer a product mix, which consists of all of the product lines offered by an organization. For
example, Cray Inc. has a small product mix of three product lines (supercomputers, storage systems, and
a “data appliance”) that are sold mostly to governments and large businesses. Procter & Gamble,
however, has a large product mix that includes product lines such as beauty and grooming (Crest
toothpaste and Gillette razors) and household care (Downy fabric softener, Tide detergent, and Pampers
diapers).
Page 266
WHAT ARE PRODUCTS AND SERVICES?
The essence of marketing is in developing products and services to meet buyer needs. A product is a
good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers’
needs and is received in exchange for money or something else of value. Let’s clarify the meanings of
goods, services, and ideas.
LO 10-1
Recognize the various terms that pertain to products and services.
A Look at Goods, Services, and Ideas
A good has tangible attributes that a consumer’s five senses can perceive. For example, the Apple Watch
can be touched and its features can be seen and heard. A good also may have intangible attributes
consisting of its delivery or warranties and embody more abstract concepts, such as becoming healthier
or wealthier. Goods also can be divided into nondurable goods and durable goods. A nondurable good is
an item consumed in one or a few uses, such as food products and fuel. A durable good is one that
usually lasts over many uses, such as appliances, cars, and smartphones. This classification method also
provides direction for marketing actions. For example, nondurable goods, such as Wrigley’s gum, rely
heavily on consumer advertising. In contrast, costly durable goods, such as cars, generally emphasize
personal selling.
Services are intangible activities or benefits that an organization provides to satisfy consumers’ needs in
exchange for money or something else of value. Services have become a significant part of the U.S.
economy, and often augment products. For example, a product is Apple’s iPhone 6 and iPhone 6 Plus,
and Verizon is a wireless network.
Nondurable goods like chewing gum are easily consumed and rely on consumer advertising.
© Mike Hruby
Finally, in marketing, an idea is a thought that leads to a product or action, such as a concept for a new
invention or getting people out to vote.
Throughout this book, product generally includes not only physical goods but services and ideas as well.
When product is used in its narrower meaning of “goods,” it should be clear from the example or
sentence.
Classifying Products
Two broad categories of products widely used in marketing relate to the type of user. Consumer
productsare products purchased by the ultimate consumer, whereas business products (also
called B2B productsor industrial products) are products organizations buy that assist in providing other
products for resale. Some products can be considered both consumer and business items. For example,
an Apple iMac computer can be sold to consumers for personal use or to business firms for office use.
Each classification results in different marketing actions. Viewed as a consumer product, the iMac would
be sold through Apple’s retail stores or directly from its online store. As a business product, an Apple
salesperson might contact a firm’s purchasing department directly and offer discounts for large volume
purchases.
LO 10-2
Identify the ways in which consumer and business products and services can be classified.
Consumer Products The four types of consumer products shown in Figure 10-1 differ in terms of (1)
the effort the consumer spends on the decision, (2) the attributes used in making the purchase decision,
and (3) the frequency of purchase. Convenience products are items that the consumer purchases
frequently, conveniently, and with a minimum of shopping effort. Shopping products are items for which
the consumer compares several alternatives on criteria such as price, quality, or style. Specialty
productsare items that the consumer makes a special effort to search out and buy. Unsought
products are items that the consumer does not know about or knows about but does not initially want.
FIGURE 10-1How a consumer product is classified significantly affects which products consumers buy and
the marketing strategies used.
Figure 10-1 shows how each type of consumer product stresses different marketing mix actions, degrees
of brand loyalty, and shopping effort. But how a consumer product is classified depends on the individual.
One consumer may view a camera as a shopping product and visit several stores before deciding on a
brand, whereas another consumer may view a camera as a specialty product and make a special effort to
buy only a Nikon.
Page 267
Business Products A major characteristic of business products is that their sales are often the result
of derived demand; that is, sales of business products frequently result (or are derived) from the sale of
consumer products. For example, as consumer demand for Ford cars (a consumer product) increases,
the company may increase its demand for paint spraying equipment (a business product).
Business products may be classified as components or support products. Components are items that
become part of the final product. These include raw materials such as lumber, as well as assemblies such
as a Ford car engine. Support products are items used to assist in producing other products and services.
These include:
• Installations, such as buildings and fixed equipment.
• Accessory equipment, such as tools and office equipment.
• Supplies, such as stationery, paper clips, and brooms.
• Industrial services, such as maintenance, repair, and legal services.
Strategies to market business products reflect both the complexities of the product involved (paper clips
versus private jets) and the buy-class situations discussed in Chapter 6.
Classifying Services
Services can be classified according to whether they are delivered by (1) people or equipment, (2)
business firms or nonprofit organizations, or (3) government agencies. These classifications are more
thoroughly discussed in Chapter 12.
Page 268
Product Classes, Forms, Items, Lines, and Mixes
Most organizations offer a range of products and services to consumers. Each set of offerings can be
categorized according to the product class or industry to which they belong, like the iPad, which is
classified as a tablet device. Products can exist in various product forms within a product class
(see Chapters 2 and 11). A product item is a specific product that has a unique brand, size, or price. For
example, Ultra Downy softener for clothes comes in different forms (liquid for the washer and sheets for
the dryer) and load sizes (40, 60, etc.). Each of the different product items represents a separate stock
keeping unit (SKU), which is a unique identification number that defines an item for ordering or inventory
purposes.
Video 10-1
Crapola
kerin.tv/13e/v10-1
A product line is a group of product or service items that are closely …
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