Page 327 - Foundations of Marketing

294 Part 4 | Product and Price Decisions

To provide products that satisfy target markets and achieve the firm’s objectives, a mar-
keter must develop, alter, and maintain an effective product mix. An organization’s product
mix may require adjustment for a variety of reasons. Because customers’ attitudes and
product preferences change over time, their desire for certain products may wane. Coca-
Cola, for example, has seen sales of its traditional carbonated beverages decline as con-
sumers become more health-conscious. As a result, the company released 12.5-ounce and
16 -ounce bottles as well as “mini” 7.5 -ounce cans. Consumers can choose these smaller
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options over the traditional 20 -ounce or 2 -liter bottles and the 12 -ounce cans. In some
cases, a company needs to alter its product mix for competitive reasons. A marketer may
have to delete a product from the mix because a competitor dominates the market for that
product. IBM sold its personal computer division to Lenovo because of intense competi-
tion. Similarly, a firm may have to introduce a new product or modify an existing one to
compete more effectively. Google created the social network Google+ to compete with
Facebook. A marketer may expand the firm’s product mix to take advantage of excess mar-
keting and production capacity.
In this chapter we examine several ways to improve an organization’s product mix. First,
we discuss managing existing products through effective line extension and product modifi ca-
tion. Next, we examine the stages of new-product development. Then we go on to discuss the
ways companies differentiate their products in the marketplace and follow with a discussion
of product positioning and repositioning. Next, we examine the importance of deleting weak
products and the methods companies use to eliminate them. Then we explore the characteris-
tics of services as products and how these services’ characteristics affect the development of
marketing mixes for services. Finally, we look at the organizational structures used to manage
products.

LO 1 . Understand how compa- MANAGING EXISTING PRODUCTS
nies manage existing products
through line extensions and
An organization can benefit by capitalizing on its existing products. By assessing the compo-
product modifications.
sition of the current product mix, a marketer can identify weaknesses and gaps. This analy-
sis can then lead to improvement of the product mix through line extensions and product
modifications.

Line Extensions

A line extension is the development of a product closely related to one or more products in
the existing product line but designed specifically to meet somewhat different customer needs.
For example, the Porsche Cayenne S Hybrid V- 1 can drive short distances using electric power
but at high speeds can switch to gas and match the power of a V- 8 engine. This product exten-
sion of the Cayenne model provides an added benefit of fuel economy without compromising
the performance that is a hallmark of the brand.
Many of the so-called new products introduced each year are, in fact, line extensions.
Line extensions are more common than new products because they are a less expensive,
lower-risk alternative for increasing sales. A line extension may focus on a different market
segment or may be an attempt to increase sales within the same market segment by more
precisely satisfying the needs of people in that segment. The success of a line extension is
line extension Development of
a product closely related to one enhanced if the parent brand has a high-quality brand image and if there is a good fi t between
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or more products in the existing the line extension and its parent. For instance, Procter & Gamble developed Tide Pods for
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product line but designed consumers who do not like to measure out their detergent. On the other hand, Burger King
specifically to meet somewhat boxer shorts were an unsuccessful line extension because fast food seems to have little in
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different customer needs common with underwear.

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