2beProduct Planning & Development9-y6

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Copyright 2001 McGraw-Hill Ryerson Limited 9 - 1

Product Planning

andDevelopment


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Chapter GoalsTo gain an understanding of: The meaning of total product and new

product Classification of business and consumer products

and its relevance to marketing planning Product innovation The product-development process When to add new products to a product line The adoption and diffusion process for products Organizational structures for product planning

and development


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What is a Product? it is more than physical products; includes

services, places, persons, and ideas it is easy to visualize the products of Esso, but

more difficult to describe those of theNewYork Symphony, UNICEF, or MEG

Some products are sold only to consumers,while others are sold to organizations

Whether a product is a consumer product or abusiness product depends on how it is used


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Sellers services

Productquality Physical

characteristicsof goods

Price

Brand

Design

PackagingProductwarranty

Sellers reputation

Colour

The Total Product


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Consumer GoodsClassesConsumer products can be classified by thebuying behaviour of the consumers: Convenience goods are bought with little time

and effort, such as milk, bread, a chocolate bar. Shopping goods are those where extensive

comparison is the norm-- cars, furniture,clothes.

Specialty goods are those for which consumershave a strong brand preference. BMW, Armani. Unsought goods are those now unknown to the

consumer or, if known, undesired.


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Classifying Business Products Raw materials : unprocessed, become part of

other manufactured products Manufactured parts and materials: processed

products that become part of other products Installations: major buildings and equipment Accessory equipment: used in operations,

include computers, desks, tools Operating supplies : low value, used by most

firms, convenience products for businesses


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Innovation is Required Products go through life cycles-- you need new

ones coming on stream. Profits highest when products new.

Consumers more selective: they look carefullyat each purchase. Also a little jaded. High failure rates in the 75% range. Leads to new products:

Innovative= truly unique Improved, with valuable new benefits Imitative, another me too product.


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1. Standard 2000 car.2. Duponts Corfam synthetic leather.3. Polaroids Polavision.4. Ra-One movie.5. RCAs Videodisc.6. Times TV-Cable Weekmagazine.

Product Failures


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New Product Development Companies must be constantly modifying

existing products and developing newones; the marketplace demands it

How new is new? most new products aremodifications of or extensions to existingones

The introduction of a new product is astrategic decision which should be guidedby the companys goals and a new productintroduction strategy


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Identifythe strategic

role of newproducts,then...

1.Idea

generation

2.Screening

of ideas

3.Businessanalysis

4.Prototype

development

5.MarketTests

6.Commer-cialization

The New Product Development Process


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The New Product Development Process A new product is best developed

through a series of six stages: The first two stages provide a focus

for generating new-product ideas anda basis for evaluating them. The next three stages deal with ideas

and are the least expensive. In their haste, some companies skip

stages the most common omissionbeing market tests.

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Criteria for New Products

There must be adequate market demand: thisis necessary but not sufficient for success

Must satisfy key financial criteria

Must be compatible with environmentalstandards Must fit with the companys marketing

structure Should also be compatible with production

capabilities, satisfy legal requirements, and fitwith corporate goals and objectives


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Copyright 2001 McGraw-Hill Ryerson Limited9 - 13

Development of New Product Strategy

CompanyGoals

Product Strategy Examples

Defend marketshare

Introduce addition toexisting produceline/ revise existingproduct

Pizza Huts Big New Yorker andStuffed Crustpies

Strengthen

reputation asan innovator

Introduce a really

new product - not just an extension ofan existing product

Digital cameras

introduced bySony, Canon,and other firms


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Adoption-Diffusion Process Different new products are adopted by

consumers at different rates The individual consumer goes through certain

stages before adopting a new product Marketers must be interested in first creating

awareness, then interest, then trial, before theconsumer is considered an adopter

Some people are genuine innovators, whileothers wait and try later; some never adopt


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New Product Adoptionand Diffusion

Adoption process: The decision-making activity of an individual

through which the new product isaccepted. Diffusion: The process by which

an innovation is spread through asocial system over time.


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Adopter Categories

Researchers have identified five categoriesof individual adopters for new products: Innovators 3% of the market. Early adopters 13% of the market. Early majority 34% of the market. Late majority 34% of the market. Laggards 16% of the market.

In addition, some individuals nonadopters never accept the innovation.


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New ProductOrganizationCompanies take a variety of approachesto organizing the new product function: Product-planning committees New-product departments Cross-functional new venture teams Product managers

Many larger firms are replacing theproduct manager with category managers

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2beProduct Planning & Development9-y6