Page 354 - Foundations of Marketing

Developing and Managing Goods and Services | Chapter 11 321

2. Describe how businesses develop a product 5. Understand how product deletion is used to
idea into a commercial product. improve product mixes.
Before a product is introduced, it goes through a seven-phase Product deletion is the process of eliminating a product
new-product development process. In the idea- generation that no longer satisfies a sufficient number of customers.
phase, new-product ideas may come from internal or exter- Although a firm’s personnel may oppose product deletion,
nal sources. In the process of screening, ideas are evaluated weak products are unprofitable, consume too much time and
to determine whether they are consistent with the firm’s effort, may require shorter production runs, and can create an
overall objectives and resources. Concept testing, the third unfavorable impression of the firm’s other products. A prod-
phase, involves having a small sample of potential custom- uct mix should be systematically reviewed to determine when
ers review a brief description of the product idea to deter- to delete products. Products to be deleted can be phased out,
mine their initial perceptions of the proposed product and run out, or dropped immediately.
their early buying intentions. During the business analysis 6. Understand the characteristics of services and
stage, the product idea is evaluated to determine its poten-
tial contribution to the firm’s sales, costs, and profits. In the how these characteristics present challenges
product development stage, the organization determines if when developing marketing mixes for service
it is technically feasible to produce the product and if it can products.
be produced at a cost low enough to make the final price
Services are intangible products involving deeds, perfor-
reasonable. Test marketing is a limited introduction of a
mances, or efforts that cannot be physically possessed.
product in areas chosen to represent the intended market.
They have six fundamental characteristics: intangibility,
Finally, in the commercialization phase, full-scale produc-
inseparability of production and consumption, perishabil-
tion of the product begins, and a complete marketing strat-
ity, heterogeneity, client-based relationships, and customer
egy is developed.
contact. Intangibility means that a service cannot be seen,
3. Know the importance of product differentiation touched, tasted, or smelled. Inseparability refers to the fact
and the elements that differentiate one product that the production of a service cannot be separated from
from another. its consumption. Perishability means that unused service
capacity of one time period cannot be stored for future use.
Product differentiation is the process of creating and design- Heterogeneity is variation in service quality. Client-based
ing products so that customers perceive them as different relationships are interactions with customers that lead to the
from competing products. Product quality, product design repeated use of a service over time. Customer contact is the
and features, and product support services are three dimen- interaction needed to deliver a service between providers
sions of product differentiation that companies consider and customers.
when creating and marketing products.
7. Be familiar with organizational structures used
4. Explain product positioning and for developing and managing products.
repositioning. Often, the traditional functional form or organization does
Product positioning refers to the decisions and activities that not lend itself to the complex task of developing and man-
create and maintain a certain concept of the firm’s product in aging products. Alternative organizational forms include
the customer’s mind. Organizations can position a product the product or brand manager approach, and the venture
to compete head to head with another brand if the product’s team approach. A product manager is responsible for a
performance is at least equal to the competitive brand’s and if product, a product line, or several distinct products that
the product is priced lower. When a brand possesses unique make up an interrelated group within a multiproduct orga-
characteristics that are important to some buyers, position- nization. A brand manager is a product manager who is
ing it to avoid competition is appropriate. Companies also responsible for a single brand. A venture team is some-
increase an existing brand’s market share and profitability times used to create entirely new products that may be
through product repositioning. aimed at new markets.

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