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BA 2303
Principles of Marketing - UNBSJ
Developing New
Products and Services
Instructor – Terry Conrod
BA 2303
Learning Objectives
1.Recognize the various terms that pertain to products and
services.
2.Identify the ways in which consumer and business goods and
services can be classified.
3.Explain the implications of alternative ways of viewing “newness”
in new products and services.
4.Describe the factors contributing to a product’s or service’s
failure.
5.Explain the purposes of each step of the new-product process.
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THE VARIATIONS OF PRODUCTS
‣ Product Line and Product Mix
‣ Classifying Products
‣ Type of User
‣ Consumer goods
‣ Business goods
‣ Degree of Tangibility
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CLASSIFYING CONSUMER
AND BUSINESS GOODS
‣ Classification of Consumer Goods
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Convenience goods
Shopping goods
Specialty goods
Unsought goods
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Classification of consumer goods
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CLASSIFYING CONSUMER
AND BUSINESS GOODS
‣ Classification of Business Goods
‣ Production Goods
‣ Support Goods
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Installations
Accessory Equipment
Supplies
Services
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Concept Check
Explain the difference between product mix and
product line.
Answer:
A product line is 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. Each product line has its own
marketing strategy, whereas a product mix is a number of
product lines offered by a company.
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Concept Check
What are the four main types of consumer goods?
Answer:
The four main types of consumer goods are: (1)
Convenience goods, (2) Shopping goods, (3)
Specialty goods, and (4) Unsought goods
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Concept Check
To which type of good (business or consumer) does
the term derived demand generally apply?
Answer:
Derived demand generally applies to an
organizational or business good.
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WHAT IS A NEW PRODUCT?
‣ Newness Compared with Existing Products
‣ Newness in Legal Terms
‣ Newness from the Company’s Perspective
‣ Newness from the Consumer’s Perspective
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Consumption effects define newness
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WHAT ARE NEW SERVICES?
‣ Major service innovations
‣ Major process innovations
‣ Service-line extensions
‣ Process-line extensions
‣ Supplementary-service innovations
‣ Basic service improvements
‣ Style changes
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WHY NEW PRODUCTS OR SERVICES
SUCCEED OR FAIL
‣ Marketing Reasons for New-Product Failures
‣ Insignificant “point of difference”
‣ Incomplete market and product definition
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(Protocol)
Too little market attractiveness
Poor execution of the marketing mix
Poor product quality on critical factors
Bad timing
No economical access to buyers
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Concept Check
From a consumer’s viewpoint, what kind of innovation
would an improved electric toothbrush be?
Answer:
An improved electric toothbrush would be a
dynamically continuous innovation.
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Concept Check
What does “insignificant point of difference” mean
as a reason for new-product failure?
Answer:
"Insignificant point of difference" means that a
distinctive product feature may have been absent
from the new-product. A "point of difference" is
necessary for a new product to defeat competitive
ones - through the possession of superior
characteristics that deliver unique benefits to the
user.
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THE NEW-PRODUCT PROCESS
‣ New-Product Strategy Development
‣ Objectives of the Stage: Identify Markets and Strategic Roles
‣ Cross-Functional Teams
‣ Six Sigma
‣ Lead Users
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Stages in the new-product process
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THE NEW-PRODUCT PROCESS
‣ Idea Generation
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Customer and Supplier Suggestions
Employee and Co-Worker Suggestions
Research and Development Breakthroughs
Competitive Products
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THE NEW-PRODUCT PROCESS
‣ Screening and Evaluation
‣ Internal Approach
‣ External Approach
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Concept Check
What is the first step in the new-product process?
Answer:
New-product strategy development
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Concept Check
What are main sources of new-product ideas?
Answer:
The four sources of new-product ideas are: (1)
Customer and supplier suggestions, (2) Employee
and co-worker, (3) Research and development
breakthroughs, and (4) Competitive products
BA 2303
Concept Check
What is the difference between internal and external
screening and evaluation approaches used by a firm in
the new-product process?
Answer:
Internal approach means the firm evaluates the technical
feasibility of the proposal and whether the idea meets the
objectives defined in the new-product strategy
development step. This is all done "in house." External
evaluations of concept tests consist of preliminary testing
of the new-product idea (rather than the actual product)
with consumers.
BA 2303
THE NEW-PRODUCT PROCESS
‣ Business Analysis
‣ Development
‣ Market Testing
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Test Marketing
Simulated Test Markets
Virtual Reality Market Testing
When Test Markets Do Not Work
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THE NEW-PRODUCT PROCESS
‣ Commercialization
‣ Slotting fee
‣ Failure fee
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Marketing information and methods used in the newproduct process
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Concept Check
How does the development stage of the new-product
process involve testing the product inside and outside
the firm?
Answer:
The development stage of the new-product
process involves testing the product inside and
outside the firm by: (1) Conducting lab tests and
(2) Consumer tests
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Concept Check
What is a test market?
Answer:
Market testing is the exposing of actual products to
prospective consumers under realistic purchase
conditions to see if they will buy.
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Concept Check
What is the commercialization of a new product?
Answer:
Commercialization of a new product is the final
stage. It is positioning and launching a new
product in full-scale and sales.
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Product
‣ A good, service, or idea consisting of a bundle of
tangible and intangible attributes that satisfies
consumers and is received in exchanges for money or
some other unit of value.
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Product Line
‣ 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 outlets, or fall within a given price
range.
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Consumer Goods
‣ Products purchased by the ultimate consumer.
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Business Goods
‣ Products that assist directly or indirectly in providing
products for resale.
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Convenience Goods
‣ Items that the consumer purchases frequently and
with a minimum of shopping effort.
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Shopping Goods
‣ Items for which the consumer compares several
alternatives on criteria such as price, quality, or
style.
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Specialty Goods
‣ Items that a consumer makes a special effort to
search out and buy.
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Unsought Goods
‣ Items that the consumer either does not know about
or knows about but does not initially want.
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Production Goods
‣ Items used in the manufacturing process that become
part of the final product.
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Support Goods
‣ Items used to assist in producing other goods and
services.
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Protocol
‣ A statement that, before product development
begins, identifies (1) a well-defined target market; (2)
specific customer’ needs, wants, and preferences; an
(3) what the product will do.
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New-Product Process
‣ The sequence of activities a firm uses to identify
business opportunities and convert them to a saleable
good or service.
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New-Product
Strategy Development
‣ Defining the role for a new product in terms of the
firm’s overall corporate objectives.
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Six Sigma
‣ A means to “delight the customer” by achieving
quality through a highly disciplined process to focus
on developing and delivering near-perfect products
and services.
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Idea Generation
‣ Developing a pool of concepts as candidates for new
products.
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Screening and Evaluation
‣ The third stage of the new product process which
involves internal and external evaluations of the newproduct ideas to eliminate those that warrant no
further effort.
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Business Analysis
‣ Involves specifying the features of the product and
the marketing strategy needed to commercialize it
and making necessary financial projections.
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Development
‣ Turning the idea on paper into a prototype.
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Market Testing
‣ Exposing actual products to prospective consumers
under realistic purchase conditions to see if they will
buy.
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Commercialization
‣ Positioning and launching a new product in full-scale
production and sales.
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Slotting Fee
‣ Payment manufacturer makes to place a new item on
a retailer’s shelf.
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Failure Fee
‣ A penalty payment made by a manufacturer to
compensate the retailer for sales its valuable shelf
space never made.
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Product Mix
‣ The number of product lines offered by a company.