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DEVELOPING NEW PRODUCTS
AND SERVICES
CHAPTER
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AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO:
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 significance of “newness” in new products and services as it relates to the degree of consumer learning involved.
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AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO:
4. Describe the factors contributing a new product’s or service’s success or failure.
5. Explain the purposes of each step of the new-product process.
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3M’S NEW GREPTILE GRIP GOLF GLOVE: HOW TO GET TO THE TOP
OF THE LEADER BOARD
• The Product?
• The TargetMarket?
• The SpecialMarketing Task?
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THE VARIATIONS OF PRODUCTS
• Product
Product Line
Product Mix
• Product Line and Product Mix
• Product Item
• Stock Keeping Unit (SKU)
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Little Remedies How does an extensive product line benefit
both consumers and retailers?
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THE VARIATIONS OF PRODUCTS
Type of User
Degree of Tangibility
• Classifying Products
• Consumer Goods • Business Goods
• Nondurable Good
• Durable Good
• Services
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THE VARIATIONS OF PRODUCTS
• The Uniqueness of Services
Intangibility
Inconsistency
Inseparability
Inventory
• Idle Production Capacity
The Four I’s of Services
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FIGURE 10-1 FIGURE 10-1 Importance of services in the U.S. gross domestic product (GDP)
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FIGURE 10-AFIGURE 10-A The 4 I’s of services
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CLASSIFYING GOODS AND SERVICES
Convenience Goods
• Classifying Consumer Goods
Shopping Goods
Specialty Goods
Unsought Goods
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FIGURE 10-2 FIGURE 10-2 Classification of consumer goods
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Raymond Weil Watch What type of consumer good?
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Production Goods
• Classifying Business Goods
Support Goods
• Installations
• Accessory Equipment
• Supplies
• Industrial Services
CLASSIFYING GOODSAND SERVICES
Derived Demand
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• Classifying Services
CLASSIFYING GOODSAND SERVICES
Delivery by People or Equipment
Profit or Nonprofit Organizations
Government Sponsored
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FIGURE 10-B FIGURE 10-B Service classifications
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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 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.
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Concept Check
2. What are the four main types of consumer goods?
A: convenience, shopping, specialty, and unsought
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Concept Check
3. What are three ways to classify services?
A: (1) delivered by people or equipment, (2) profit or nonprofit,and (3) government sponsored or not
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NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL
Functionally Different from Existing Products
• What is a New Product?
FTC: Newness = 6 Months or less After Regular Distribution
Company: Simply Anything Different
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Sony’s PlayStation 3 and Microsoft’s Xbox How does the term “new” apply?
XboxPS3
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NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL
• What is a New Product?
• Continuous Innovation
Newness from the Consumer’s Perspective
• Dynamically Continuous Innovation
• Discontinuous Innovation
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FIGURE 10-3FIGURE 10-3 Product “newness,” as defined by the degree of consumer learning needed to use the product
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NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL
• Why Products Succeed or Fail
• Insignificant Point of Difference
Marketing Reasons for New-Product Failures
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FIGURE 10-DFIGURE 10-D What it takes to launch one commercially successful new product
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General Mills FingosWhy did this product fail?
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NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL
• Why Products Succeed or Fail
Marketing Reasons for New-Product Failures
• Too Little Market Attractiveness
• Incomplete Market and Product Definition Before Product Development Starts
Protocol
• Poor Execution of the Marketing Mix: Name, Price, Promotion, and Distribution
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NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL
• Why Products Succeed or Fail
Marketing Reasons for New-Product Failures
• Bad Timing
• Poor Product Quality or Insensitivity to Customer Needs on Critical Factors
• No Economic Access to Buyers
A Look at Some Failures
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Thirsty Dog! and Thirsty Cat!Why did these products fail?
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FIGURE 10-4 FIGURE 10-4 Why did these new products fail?
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Concept Check
1. From a consumer’s viewpoint, what kind of innovation would an improved electric toothbrush be?
A: continuous innovation
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Concept Check
2. What does “insignificant point of difference” mean as a reason for new-product failure?
A: The product must have superior characteristics that deliver unique benefits to the user compared to those of competitors.
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THE NEW-PRODUCT PROCESS
Objectives of the Stage: Identify Markets and Strategic Roles
3M: Cross-Functional Teams and Six Sigma
• New-Product Process
• Cross-Functional Teams
• New-Product Strategy Development
• Six Sigma
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FIGURE 10-5 FIGURE 10-5 Stages in the new-product process
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FIGURE 10-EFIGURE 10-E Strategic roles of most successful new products
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THE NEW-PRODUCT PROCESS
Customer and Supplier Suggestions
• Idea Generation
Employee and Co-Worker Suggestions
Research and Development Breakthroughs
Competitive Products
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Volvo’s YCCHow are new-product ideas generated?
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THE NEW-PRODUCT PROCESS
Internal Approach
• Screening and Evaluation
• Concept Tests
External Approach
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Frito-Lay Natural SnacksHow are new-product ideas screened & evaluated?
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Concept Check
A: These are: (1) new-product strategy development; (2) idea generation;(3) screening and evaluation;(4) business analysis;(5) development; (6) market testing; and (7) commercialization.
1. What are the seven stages in the new-product process?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-41
Concept Check
A: Customer and supplier suggestions, employee suggestions, R&D breakthroughs, and competitive products.
2. What are main sources of new-product ideas?
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THE NEW-PRODUCT PROCESS
Prototype
• Business Analysis
Assessing the “Business Fit” of theNew Product
Big G plus Pillsbury: Finding Synergies,Segments, and Partners
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Pillsbury What synergies, segments, or partners?
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THE NEW-PRODUCT PROCESS
“Failure Analysis”
• Development
Safety Tests
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Mattel’s BarbieWhy should laboratory and safety tests be done?
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THE NEW-PRODUCT PROCESS
Test Marketing
• Market Testing
When Test Markets Don’t Work
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FIGURE 10-6FIGURE 10-6 Six important U.S. test markets and the “demographics winner”:Wichita Falls, Texas, metropolitan statistical area
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-48
THE NEW-PRODUCT PROCESS
Burger King’s French Fries: The Complexities of Commercialization
• Commercialization
Speed as a Factor in New-Product Success
Winning Strategies in Commercializing Services
• Time to Market (TtM)
• Parallel Development
• Fast Prototyping
Regional Rollouts
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-49
FIGURE 10-7 FIGURE 10-7 Marketing information and methods used in the new-product process
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Burger King French FriesWhy is commercialization risky?
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Hewlett-Packard Cross-Functional TeamWhy is time to market (TtM) important?
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Concept Check
1. How does the development stage of the new-product process involve testing the product inside and outside the firm?
A: Internally, laboratory tests are done to see if the product achieves physical, quality, and safety standards; externally, consumer tests are done.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-53
Concept Check
2. What is a test market?
A: A test market is a city that is viewed as being representative of U.S. consumers in terms of demographics and brand purchase behaviors, is far enough from big markets to allow low-cost advertising, and has tracking systems to measure sales.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-54
Concept Check
A: Commercialization involves positioning and launching a new product in full-scale production and sales and is the most expensive stage for most new products.
3. What is commercialization of a new product?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-55
JALAPEÑO SODA, ANYONE?
GOING ONLINE
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1. Access the NewProductWorks website. Study the “Hits and Misses” categories: “We Expect Them to be Successes,” “Jury is Out,” “Failures,” and “Favorite Failures.” Pick two of the failed products and identify the reasons that led to their failure.
Going Online
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-57
Going Online
2. Contrast these failed products with those that are deemed successes to learn why they became “sure-fire winners.”
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-58
3M™ GREPTILE GRIP ™
GOLF GLOVE:GREAT GRIPPING!
VIDEO CASE 10
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VIDEO CASE 103M
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1. What are the characteristics of the target market for the 3M Greptile Grip golf glove?
VIDEO CASE 103M
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2. What are the key points of difference of the 3M Greptile Grip golf glove when compared to competitors’ products, such as FootJoy and Nike? Substitute products, such as golf grips?
VIDEO CASE 103M
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3. How does the Greptile Grip golf glove meet 3M’s three criteria for new products?
VIDEO CASE 103M
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4. Since 3M has no prior products for the golf market, what special promotion and distribution problems might 3M have?
VIDEO CASE 103M
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5. How would you rate the 3M Greptile Grip golf glove on the following reasons for success and failure: (a) significant points of difference;(b) size and growth of the golf market;(c) product quality; (d) market timing;(e) execution of the marketing mix;(f) synergy or fit with 3M’s R&D, manufacturing and/or marketing capabilities; and (g) access to consumers?
VIDEO CASE 103M
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WHY NEW-PRODUCT DEVELOPMENT CAN BE
A DICE ROLL:SOME FORECASTS
SUPPLEMENTALLECTURE NOTE 10-1
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FIGURE 10-CFIGURE 10-C Why new-product development can be a dice roll: some forecasts
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THE NEW-PRODUCT PROCESS AT 3M
SUPPLEMENTALLECTURE NOTE 10-2
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3M New-Product IdeaUltrathon Insect Repellent
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WHAT WERE THEY THINKING? ANALYZING
SOME NEW PRODUCT DISASTERS
IN-CLASS ACTIVITY 10-1
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Problem Product A: Adam’s Body Smarts
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Problem Product B: Coca Cola’s Surge
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Problem Product C: Wheaties Dunk-A-Balls
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Problem Product D: Garlic Cake
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Problem Product E: Kellogg’s Special K Plus
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Problem Product F: Dr. Care Toothpaste
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HOW CAN 3M ENTERTHE PET CARE MARKET?
IN-CLASS ACTIVITY 10-2
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3M Pet Care Product Lines: End of 2005
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3M Pet Care Liquid Bandage: Early 2006
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3M Pet Care Health Market Products: 2006
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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.
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.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-88
Product Line
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.
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.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-89
Product Mix
The product mix is the number of product lines offered by a company.The product mix is the number of product lines offered by a company.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-90
Consumer Goods
Consumer goods are products purchased by the ultimate consumer.Consumer goods are products purchased by the ultimate consumer.
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Business Goods
Business goods are products that assist directly or indirectly in providing products for resale. Also called as B2B goods, industrial goods, or organizational goods.
Business goods are products that assist directly or indirectly in providing products for resale. Also called as B2B goods, industrial goods, or organizational goods.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-92
Services
Services are intangible activities or benefits that an organization provides to consumers in exchange for money or something else of value.
Services are intangible activities or benefits that an organization provides to consumers in exchange for money or something else of value.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-93
Idle Production Capacity
Idle production capacity occurs when the service provider is available but there is no demand.
Idle production capacity occurs when the service provider is available but there is no demand.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-94
New-Product Process
The new-product process consists of seven stages a firm goes through to identify business opportunities and convert them to a salable good or service.
The new-product process consists of seven stages a firm goes through to identify business opportunities and convert them to a salable good or service.
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