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DEVELOPING NEW PRODUCTS

AND SERVICES

CHAPTER

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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?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

THE VARIATIONS OF PRODUCTS

Slide 10-6

• 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?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

THE VARIATIONS OF PRODUCTS

Slide 10-8

Type of User

Degree of Tangibility

• Classifying Products

• Consumer Goods • Business Goods

• Nondurable Good

• Durable Good

• Services

Services and New-Product Development

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

CLASSIFYING CONSUMER AND BUSINESS GOODS

Slide 10-9

Convenience Goods

• Classification of Consumer Goods

Shopping Goods

Specialty Goods

Unsought Goods

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FIGURE 10-1 FIGURE 10-1 Classification of consumer goods

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Raymond Weil Watch What type of consumer good?

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CLASSIFYING CONSUMER AND BUSINESS GOODS

Slide 10-12

Production Goods

• Classification of Business Goods

Support Goods

• Installations

• Accessory Equipment

• Supplies

• Industrial Services

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

Slide 10-16

Newness Compared with Existing Products

• What is a New Product?

Newness in Legal Terms (Regular Distribution?)

Newness from the Company’s Perspective

• Regular Distribution

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Sony’s PlayStation 2 and Microsoft’s Xbox How does the term “new” apply?

XboxPS2

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MARKETING NEWSNET

Blindsided in the Twenty-First Century—The Convergence of Digital Devices

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

Slide 10-19

• What is a New Product?

• Continuous Innovation

Newness from the Consumer’s Perspective

• Dynamically Continuous Innovation

• Discontinuous Innovation

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FIGURE 10-2 FIGURE 10-2 Consumption effects define newness

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

Slide 10-21

• Why Products Succeed or Fail

• Insignificant Point of Difference

Marketing Reasons for New-Product Failures

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FIGURE 10-BFIGURE 10-B What it takes to launch one commercially successful new product

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MARKETING NEWSNET

What Separates New-ProductWinners and Losers

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NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

Slide 10-25

• 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

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

Slide 10-26

• 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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MARKETING NEWSNET

When Less is More—How Reducing the Number of Features

Can Open Up Huge Markets

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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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FIGURE 10-4 FIGURE 10-4 Stages in the new-product process

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FIGURE 10-CFIGURE 10-C Strategic roles of most successful new products

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THE NEW-PRODUCT PROCESS

Slide 10-35

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?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

THE NEW-PRODUCT PROCESS

Slide 10-38

Internal Approach

• Screening and Evaluation

• Concept Tests

External Approach

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3M Post-it Flag HighlighterHow are new-product ideas screened & evaluated?

+ =3M Post-it

Flag Highlighters3M Post-it Notes Felt Tip Highlighters

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Frito-Lay Natural SnacksHow are new-product ideas screened & evaluated?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

THE NEW-PRODUCT PROCESS

Slide 10-44

Prototype

• Business Analysis

• Development

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Mattel’s BarbieWhy should laboratory and safety tests be done?

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ETHICS AND SOCIAL RESPONSIBILITY ALERT

SUVs and Pickups versus Cars—Godzilla Meets a Chimp?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

THE NEW-PRODUCT PROCESS

Slide 10-47

Test Marketing

• Market Testing

Simulated (or Laboratory) Test Markets (STM)

When Test Markets Don’t Work

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FIGURE 10-5FIGURE 10-5 Six important U.S. test markets and the “demographics winner”:Wichita Falls, Texas, metropolitan statistical area

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

THE NEW-PRODUCT PROCESS

Slide 10-49

Burger King’s French Fries: The Complexities of Commercialization

• Commercialization

Speed as a Factor in New-Product Success

The Risks and Uncertainties of the Commercialization Stage

• Slotting Fee • Failure Fee

• Time to Market (TtM)

• Parallel Development

• Fast Prototyping

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FIGURE 10-6 FIGURE 10-6 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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FIGURE 10-DFIGURE 10-D Five alternative structures for product development projects

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FIGURE 10-EFIGURE 10-E Overall performance of five structures for product development projects

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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.

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Product Line

A product line is a group of productsthat 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 productsthat 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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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.

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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.

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Convenience Goods

Convenience goods are items thatthe consumer purchases frequently, conveniently, and with a minimumof shopping effort.

Convenience goods are items thatthe consumer purchases frequently, conveniently, and with a minimumof shopping effort.

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Shopping Goods

Shopping goods are items for which the consumer compares several alternatives on criteria, such as price, quality, or style.

Shopping goods are items for which the consumer compares several alternatives on criteria, such as price, quality, or style.

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Specialty Goods

Specialty goods are items that a consumer makes a special effort tosearch out and buy.

Specialty goods are items that a consumer makes a special effort tosearch out and buy.

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Unsought Goods

Unsought goods are items that the consumer either does not know about or knows about but does not initially want.

Unsought goods are items that the consumer either does not know about or knows about but does not initially want.

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Production Goods

Production goods are items used in the manufacturing process that become part of the final product.

Production goods are items used in the manufacturing process that become part of the final product.

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Support Goods

Support goods are items used to assist in producing other goods and services.Support goods are items used to assist in producing other goods and services.

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Protocol

A protocol is a statement that, before product development begins, identifies: (1) a well-defined target market;(2) specific customers’ needs, wants,and preferences; and (3) what theproduct will be and do.

A protocol is a statement that, before product development begins, identifies: (1) a well-defined target market;(2) specific customers’ needs, wants,and preferences; and (3) what theproduct will be and do.

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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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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.

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.

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Six Sigma

Six Sigma is a means to “delight the customer” by achieving quality througha highly disciplined process to focus on developing and delivering near-perfect products and services.

Six Sigma is a means to “delight the customer” by achieving quality througha highly disciplined process to focus on developing and delivering near-perfect products and services.

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Idea Generation

Idea generation is the stage of the new-product process that involves developing a pool of concepts as candidates for new products.

Idea generation is the stage of the new-product process that involves developing a pool of concepts as candidates for new products.

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Screening and Evaluation

Screening and evaluation is the stageof the new-product process that involves internal and external evaluations of the new-product ideas to eliminate thosethat warrant no further effort.

Screening and evaluation is the stageof the new-product process that involves internal and external evaluations of the new-product ideas to eliminate thosethat warrant no further effort.

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Business Analysis

Business analysis is the stage of thenew-product process that involves specifying the product features and marketing strategy and makingnecessary financial projections neededto commercialize a product.

Business analysis is the stage of thenew-product process that involves specifying the product features and marketing strategy and makingnecessary financial projections neededto commercialize a product.

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Development

Development is the stage of the new-product process that involves turningthe idea on paper into a prototype.

Development is the stage of the new-product process that involves turningthe idea on paper into a prototype.

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Market Testing

Market testing is the stage of thenew-product process that involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy.

Market testing is the stage of thenew-product process that involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy.

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Commercialization

Commercialization is the stage of the new-product process that involves positioning and launching a new product in full-scale production and sales.

Commercialization is the stage of the new-product process that involves positioning and launching a new product in full-scale production and sales.

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Slotting Fee

A slotting fee is a payment a manufacturer makes to place anew item on a retailer’s shelf.

A slotting fee is a payment a manufacturer makes to place anew item on a retailer’s shelf.

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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.

A failure fee is a penalty payment a manufacturer makes to compensate a retailer for sales its valuable shelf space failed to make.