Transcript Chapter 10a - Developing New Products and Servicesx

McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
LEARNING OBJECTIVES (LO)
AFTER READING CHAPTER 10, YOU SHOULD BE ABLE TO:
LO1
Recognize the various terms that
pertain to products and services.
LO2
Identify the ways in which consumer
and business goods can be classified.
LO3
Explain the significance of “newness”
in new products and services as it
relates to the degree of consumer
learning involved.
10-2
LEARNING OBJECTIVES (LO)
AFTER READING CHAPTER 10, YOU SHOULD BE ABLE TO:
LO4
Describe the factors contributing to a
new product’s or service’s success or
failure.
LO5
Explain the purposes of each step of
the new-product process.
10-3
NEW PRODUCT REVOLUTIONS:
APPLE AND ITS INNOVATION MACHINE
10-4
NEW PRODUCT REVOLUTIONS:
APPLE AND ITS INNOVATION MACHINE

Apple’s Innovation
Machine

How the iPhone
Came About

What the iPhone
Can Do
10-5
LO1
THE VARIATION OF PRODUCTS
PRODUCT, PRODUCT LINE, AND PRODUCT MIX

Product

Product Line
• Product Item
• Stock Keeping Unit (SKU)

Product Mix
10-6
3M’S NEW GREPTILE GRIP GOLF
GLOVE: HOW TO GET TO THE TOP
OF THE LEADER BOARD
• The Product?
• The Target
Market?
• The Special
Marketing Task?
Slide 10-5
THE VARIATIONS OF PRODUCTS
• Product
• Product Line and Product Mix
 Product Line
• Product Item
• Stock Keeping Unit (SKU)
 Product Mix
Slide 10-6
PRODUCT
Any physical good, service, or
idea that satisfies a want or
need; plus anything that would
enhance the product in the eyes
of the consumers, such as the
brand
PRODUCT LINE & PRODUCT MIX
●Product
●Group
Line
of
products that are
physically similar
or are intended
for a similar
market
PRODUCT LINE & PRODUCT MIX
●Product
Line
Item – a specific product as
noted by a unique brand, size, or
price
●Stock Keeping Unit (SKU) – a unique
identification number that defines an
item for ordering or inventory
purposes
●Product
Little Remedies
How does an extensive product line benefit
both consumers and retailers?
Slide 10-7
PRODUCT LINE & PRODUCT MIX
●Product
Mix
●Combination
of
manufacturer’s
product lines
MICKEY MOUSE’S PRODUCT MIX
Theme
parks
& resorts
ABC
Television
Network
TV & radio
stations
Film studios &
production
Video
programs &
licensing
Consumer
products
Publishing
PRODUCT DIFFERENTIATION
●Creation
of real or perceived
differences
● Actual
product differences are
sometimes quite small
● Marketers
must create a unique,
attractive image
Little Remedies
LO1
How does an extensive product line benefit
both consumers and retailers?
10-16
THE VARIATION OF PRODUCTS
LO1
CLASSIFYING PRODUCTS
 I.
Type of User
• Consumer Goods
• Business Goods
10-17
I. Type Of User
●Consumer
●Purchased
by the
ultimate consumer
●Sometimes called B2C
Goods
I. Type Of User
●Business
● Purchased for use in
production of other goods
and services
● Sometimes called business
goods, B2B goods, industrial
goods, organizational or
commercial goods
● Some products can be
considered both consumer
and business items
CLASSIFYING CONSUMER AND
BUSINESS GOODS
• Classification of Consumer Goods
 Convenience Goods
 Shopping Goods
 Specialty Goods
 Unsought Goods
Slide 10-9
Convenience Goods
Convenience goods – items that
the consumer purchases frequently,
conveniently, and with a minimum of
shopping effort.
Slide 10-87
Shopping Goods
Shopping Goods – items for
which the consumer compares
several alternatives on criteria,
such as price, quality, or style.
Slide 10-88
Specialty Goods
Specialty Goods – items that a
consumer makes a special effort to
search out and buy.
Slide 10-89
Unsought Goods
Unsought Goods – items that the
consumer either does not know
about or knows about but does not
initially want.
Slide 10-90
FIGURE 10-1 How a consumer good is
classified affects what products consumers
buy and the marketing strategies used
10-25
LO2
Rolex Watch
What type of consumer good?
10-26
LO2
CLASSIFYING CONSUMER AND
BUSINESS GOODS
CLASSIFYING BUSINESS GOODS
 Production
 Support
Goods
Goods
• Installations
• Supplies
• Accessory
Equipment
• Industrial
Services
10-27
CLASSIFYING CONSUMER AND
BUSINESS
GOODS
PRODUCT
DIFFERENTIATION
●Classification
●Major
of Business Goods
characteristic is that sales are
often result of derived demand
CLASSIFYING CONSUMER AND
BUSINESS
GOODS
PRODUCT
DIFFERENTIATION
●Classification
●Production
●
of Business Goods
Goods
Items used in manufacturing process that
become part of final product, e.g., raw
materials or component parts
CLASSIFYING CONSUMER AND
BUSINESS
GOODS
PRODUCT
DIFFERENTIATION
●Support
Goods
● Items
used to assist in producing
other goods and services
● Include
:
●
Installations
●
Accessory Equipment
●
Supplies
●
Industrial Services
CLASSIFYING CONSUMER AND
BUSINESS
GOODS
PRODUCT
DIFFERENTIATION
●Support
Goods
●Installations – buildings
equipment
and fixed
●
Industrial buyers deal directly with
construction companies and
manufacturers through sales reps
●
Pricing is often through competitive
bidding
CLASSIFYING CONSUMER AND
BUSINESS
GOODS
PRODUCT
DIFFERENTIATION
●Support
Goods
●Accessory
Equipment – tools and
office equipment
●
Usually purchased in small-order sizes
by buyers
CLASSIFYING CONSUMER AND
BUSINESS
GOODS
PRODUCT
DIFFERENTIATION
●Support
Goods
●Supplies
●
Similar to consumer convenience
goods and purchased with little effort
through straight rebuy e.g., copier
paper, brooms, paper clips
●
Price and delivery are key factors
CLASSIFYING CONSUMER AND
BUSINESS
GOODS
PRODUCT
DIFFERENTIATION
●Support
Goods
●Industrial
Services – intangible
activities to assist industrial buyers
●
Maintenance and repair, legal or tax counsel
THE VARIATION OF PRODUCTS
LO1
CLASSIFYING PRODUCTS

II.
Degree of Tangibility
• Nondurable Goods
• Durable Goods
• Services
10-35
II. Degree of Tangibility
1.
Non-durable Goods
●
●
●
Consumed in one or a few uses
● E.g., food products or fuel
Tends to be inexpensive and purchased
frequently
Consumer advertising and wide distribution
II. Degree of Tangibility, cont.
Durable Goods
2.
●
Last over an extended number of uses
●
●
●
E.g., appliances, automobiles
Generally cost more and last longer
Personal selling is important marketing
activity in answering consumer questions
II. Degree of Tangibility, cont.
Services
3.
●
Intangible activities, benefits, or
satisfactions offered for sale
●
●
E.g., marketing research, health care
Special marketing needed to communicate
benefits to potential buyers
III.Services and New-Product
Development
●
“New-product” development is often
difficult to observe step by step
Concept Check
1. Explain the difference between
product mix and product line.
A: The product mix is the number of product
lines offered by a company. A product line is
a group of products or services that satisfy a
class of needs, are used together, are sold to
the same customer group, are distributed
through the same type of outlets, or fall
within a given price range.
Slide 10-13
Concept Check
2. What are the four main types of
consumer goods?
A: convenience goods, shopping
goods, specialty goods, and
unsought goods
Slide 10-14
Concept Check
3. To which type of good (business or
consumer) does the term derived
demand generally apply?
A: business
Slide 10-15
NEW PRODUCTS AND WHY THEY
SUCCEED OR FAIL
What is a New Product?
Slide 10-16
NEW PRODUCTS AND WHY
THEY SUCCEED OR FAIL
WHAT IS A NEW PRODUCT?
• What is a New Product?
 Newness in Legal Terms
• Regular Distribution
 Newness Compared with Existing Products
 Newness from the Company’s Perspective
Slide 10-16
NEW PRODUCTS AND WHY
THEY SUCCEED OR FAIL
WHAT IS A NEW PRODUCT?
 Newness in Legal Terms (Regular
Distribution)
– FTC advises that term “new” be limited
to use with product up to six months
after entering into regular distribution
Slide 10-16
NEW PRODUCTS AND WHY
THEY SUCCEED OR FAIL
WHAT IS A NEW PRODUCT?
 Newness Compared with Existing
Products
– Functionally different from existing
products
– Additional features may be added to an
existing product
Slide 10-16
LO3
NEW PRODUCTS AND WHY
THEY SUCCEED OR FAIL
WHAT IS A NEW PRODUCT?

Newness From the
Company’s Perspective
– Lowest level is a
product line extension –
incremental
improvement of an
existing product
10-49
LO3
NEW PRODUCTS AND WHY
THEY SUCCEED OR FAIL
WHAT IS A NEW PRODUCT?

Newness From the
Organization’s Perspective
– Next level is a
significant jump in
innovation or
technology
10-50
LO3
NEW PRODUCTS AND WHY
THEY SUCCEED OR FAIL
WHAT IS A NEW PRODUCT?

Newness From the
Organization’s Perspective
– True innovation is a
truly new product
10-51
NEW PRODUCTS AND WHY THEY
SUCCEED OR FAIL
Newness from the Consumer’s
Perspective
Classifies products according to the degree of
learning required by the consumer to use the
product properly:
A. Continuous Innovation
B. Dynamically Continuous Innovation
C. Discontinuous Innovation
Slide 10-16
NEW PRODUCTS AND WHY THEY
SUCCEED OR FAIL
A. Continuous Innovation
– No new behaviors must be learned
– Effective marketing depends on
generating awareness and having strong
distribution
– Not reeducating users
Slide 10-16
NEW PRODUCTS AND WHY THEY
SUCCEED OR FAIL
B. Dynamically Continuous Innovation
– Minor changes in behavior are required
– Marketing strategy is to educate
prospective buyers on their benefits,
advantages, proper use
Slide 10-16
NEW PRODUCTS AND WHY THEY
SUCCEED OR FAIL
C. Discontinuous Innovation
– Consumers must learn entirely new
consumption patterns
– Marketing efforts involve gaining initial
consumer awareness and educating
consumers on both benefits and proper
use of the innovative product – $$$$$$$
Slide 10-16
FIGURE 10-2 The degree of “newness” in a
new product affects the amount of learning
effort consumers exert to use the product
10-58
MARKETING MATTERS
Bought a Computer, Lawn Mower, and
Dishwasher? Call the Geek Squad!
10-59
FIGURE 10-A What it takes to launch one
commercially successful new product
10-60
LO4
NEW PRODUCTS AND WHY
THEY SUCCEED OR FAIL
WHY PRODUCTS SUCCEED OR FAIL

Marketing Reasons for New-Product
Failures
• Insignificant Points of Difference
• Incomplete Market and Product Definition
Before Product Development Starts
 Protocol
• Too Little Market Attractiveness
10-61
LO4
NEW PRODUCTS AND WHY
THEY SUCCEED OR FAIL
WHY PRODUCTS SUCCEED OR FAIL

Marketing Reasons for New-Product
Failures
• Poor Execution of the Marketing Mix
• Poor Product Quality or Sensitivity to
Customer Needs on Critical Factors
• Bad Timing
• No Access to Buyers
10-62
MARKETING MATTERS
What Separates New-Product
Winners and Losers?
10-65
FIGURE 10-3 Why did these two new
products fail?
10-66
LO4
NEW PRODUCTS AND WHY
THEY SUCCEED OR FAIL
WHY PRODUCTS SUCCEED OR FAIL

What Were They Thinking? Organizational
Problems in New-Product Failure
• Not Listening to the “Voice” of the Consumer
• Skipping Steps in the New-Product Process
• Marketing a Poorly Conceived Product Too Quickly
• “Groupthink” in Task Force & Committee Meetings
• Not Learning Lessons From Past Failures
10-67
USING MARKETING DASHBOARDS
Monitoring Your New-Product Launch
Household (HH) Trial and Repeat Percents
10-68
New Product Process
The new-product process
consists of the stages a firm
goes through to identify business
opportunities and convert them
to a salable good or service.
10-70
FIGURE 10-4 Stages in the new-product
process
10-71
New-Product Strategy Development
New-product strategy
development is the stage of
the new-product process that
defines the role for a new
product in terms of the firm’s
overall corporate objectives.
10-72
LO5
THE NEW-PRODUCT PROCESS
NEW-PRODUCT STRATEGY DEVELOPMENT

Objectives: Identify Markets and
Strategic Roles
• SWOT Analysis
• Environmental Scanning

Improve Innovation: Use
Cross-Functional Teams
10-73
Idea Generation
Idea generation is the stage
of the new-product process that
involves developing a pool of
concepts as candidates for new
products.
10-74
THE NEW-PRODUCT PROCESS
LO5
IDEA GENERATION

Customer and Supplier Suggestions

Employee and Co-Worker Suggestions

R&D Breakthroughs

Competitive Products

Universities, Inventors, and
Small Tech Firms
10-75
THE NEW-PRODUCT PROCESS
Screening and Evaluation
Screening and evaluation is
the stage of the new-product
process that involves internal
and external evaluations of the
new-product ideas to eliminate
those that warrant no further
effort.
10-77
THE NEW-PRODUCT PROCESS
LO5
SCREENING AND EVALUATION

Internal Approach

External Approach

Concept Tests
10-78
LO5
THE NEW-PRODUCT PROCESS
BUSINESS ANALYSIS AND DEVELOPMENT

Business Analysis

Development
10-79
THE NEW-PRODUCT PROCESS
Business Analysis
Business analysis is the stage
of the new-product process that
involves specifying the product
features and marketing strategy
and making necessary financial
projections needed to
commercialize a product.
10-80
THE NEW-PRODUCT PROCESS
Development
Development is the stage of the
new-product process that involves
turning the idea on paper into a
prototype.
10-81
THE NEW-PRODUCT PROCESS
Market Testing
Market testing is the stage of the
new-product process that involves
exposing actual products to
prospective consumers under
realistic purchase conditions to
see if they will buy.
10-82
THE NEW-PRODUCT PROCESS
LO5
MARKET TESTING

Test Marketing

Simulated Test Markets (STMs)

When Test Markets Don’t Work


Services
Expensive or Costly Products
10-83
FIGURE 10-5 Six important U.S. test
markets
10-84
THE NEW-PRODUCT PROCESS
COMMERCIALIZATION
Commercialization is the stage
of the new-product process that
involves positioning and launching
a new product in full-scale
production and sales.
10-85
LO5
THE NEW-PRODUCT PROCESS
COMMERCIALIZATION
The Risks and Uncertainties
• Slotting Fee
• Failure Fee
10-86
THE NEW-PRODUCT PROCESS
Slotting Fee
A slotting fee is a payment a
manufacturer makes to place a
new item on a retailer’s shelf.
10-87
THE NEW-PRODUCT PROCESS
Failure Fee
A failure fee is a penalty
payment a manufacturer makes
to compensate a retailer for sales
its valuable shelf space failed to
make.
10-88
LO5
THE NEW-PRODUCT PROCESS
COMMERCIALIZATION

Regional Rollouts
10-89
LO5
THE NEW-PRODUCT PROCESS
COMMERCIALIZATION

Speed as a Factor in New-Product Success
• Time to Market (TtM)
• Parallel Development
• Fast Prototyping
10-90
FIGURE 10-6 Marketing information and
methods used in each stage of the newproduct process
10-91
Product
A product is a good, service,
or idea consisting of a bundle of
tangible and intangible attributes
that satisfies consumers and is
received in exchange for money
or some other unit of value.
10-92
Product Line
A product line consists of a group
of products 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 type of outlets, or
fall within a given price range.
10-93
Product Mix
A product mix consists of the
number of product lines offered
by a company.
10-94
Consumer Goods
Consumer goods are products
purchased by the ultimate
consumer.
10-95
Business Goods
Business goods are products
that assist directly or indirectly in
providing products for resale. Also
called B2B goods, industrial
goods, or organizational goods.
10-96
Convenience Goods
Convenience goods are items
that the consumer purchases
frequently, conveniently, and with
a minimum of shopping effort.
10-97
Shopping Goods
Shopping goods are items for
which the consumer compares
several alternatives on criteria,
such as price, quality, or style.
10-98
Specialty Goods
Specialty goods are items that a
consumer makes a special effort
to search out and buy.
10-99
Unsought Goods
Unsought goods are items that
the consumer either does not
know about or knows about but
does not initially want.
10100
Production Goods
Production goods are items
used in the manufacturing
process that become part of the
final product.
10101
Support Goods
Support goods are items used
to assist in producing other goods
and services.
10102
Protocol
A protocol is a statement that,
before product development
begins, identifies: (1) a welldefined target market; (2) specific
customers’ needs, wants, and
preferences; and (3) what the
product will be and do.
10103
New-Product Process
The new-product process
consists of the stages a firm
goes through to identify business
opportunities and convert them
to a salable good or service.
10104
New-Product Strategy Development
New-product strategy
development is the stage of
the new-product process that
defines the role for a new
product in terms of the firm’s
overall corporate objectives.
10105
Idea Generation
Idea generation is the stage
of the new-product process that
involves developing a pool of
concepts as candidates for new
products.
10106
Screening and Evaluation
Screening and evaluation is
the stage of the new-product
process that involves internal
and external evaluations of the
new-product ideas to eliminate
those that warrant no further
effort.
10107
Business Analysis
Business analysis is the stage
of the new-product process that
involves specifying the product
features and marketing strategy
and making necessary financial
projections needed to
commercialize a product.
10108
Development
Development is the stage of the
new-product process that involves
turning the idea on paper into a
prototype.
10109
Market Testing
Market testing is the stage of the
new-product process that involves
exposing actual products to
prospective consumers under
realistic purchase conditions to
see if they will buy.
10110
Commercialization
Commercialization is the stage
of the new-product process that
involves positioning and launching
a new product in full-scale
production and sales.
10111
Slotting Fee
A slotting fee is a payment a
manufacturer makes to place a
new item on a retailer’s shelf.
10112
Failure Fee
A failure fee is a penalty
payment a manufacturer makes
to compensate a retailer for sales
its valuable shelf space failed to
make.
10113