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Copyright © 2012 Pearson Canada Inc.8 - 2
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 the Winnipeg Symphony Orchestra, UNICEF, or the Salvation Army
• some products are sold only to consumers, while others are sold to organizations
• whether a product is a consumer product or a business product depends on how it is used
Copyright © 2012 Pearson Canada Inc.8 - 3
Seller’sservices
Seller’sservices
Productquality
Productquality Physical
characteristicsof goods
Physicalcharacteristics
of goods
PricePrice
BrandBrand
DesignDesign
PackagingPackagingProductwarranty
Productwarranty
Seller’sreputation
Seller’sreputation
ColourColour
The Total Product
Copyright © 2012 Pearson Canada Inc.8 - 4
Consumer Goods Classes
Consumer products can be classified by the buying behaviour of the consumers:
• Convenience goodsConvenience goods are bought with little time and effort, such as milk, bread, a chocolate bar.
• Shopping goodsShopping goods are those where extensive comparison is the norm-- cars, furniture, clothes.
• Specialty goodsSpecialty goods are those for which consumers have a strong brand preference. BMW, Armani.
• Unsought goodsUnsought goods are those now unknown to the consumer or, if known, undesired.
Copyright © 2012 Pearson Canada Inc.8 - 5
Classifying Business Products
• raw materialsraw materials: unprocessed, become part of other manufactured products
• manufactured parts and materials:manufactured parts and materials: processed products that become part of other products
• installations:installations: major buildings and equipment• accessory equipment:accessory equipment: used in operations,
include computers, desks, tools• operating suppliesoperating supplies: low value, used by most
firms, convenience products for businesses
Copyright © 2012 Pearson Canada Inc.8 - 6
New-Product Development Strategy
• New-product development:– The development of original products,
improvements, modifications, and new brands through the firm’s product-development efforts
• New product innovation is expensive and risky– Estimated 80% of all new products fail or
dramatically underperform
Copyright © 2012 Pearson Canada Inc.8 - 7
Criteria for New Products
• there must be adequate market demand: this is necessary but not sufficient for success
• must satisfy key financial criteria• must be compatible with environmental
standards• must fit with the company’s marketing structure• should also be compatible with production
capabilities, satisfy legal requirements, and fit with corporate goals and objectives
Copyright © 2012 Pearson Canada Inc.8 - 8
New-Product Development Process
• Major stages in new-product development:
Copyright © 2012 Pearson Canada Inc.8 - 9
Identifythe strategicrole of newproducts,
then...
Identifythe strategicrole of newproducts,
then...
1.Idea
generation
1.Idea
generation
2.Screeningof ideas
2.Screeningof ideas
3.Businessanalysis
3.Businessanalysis
4. Prototype
development
4. Prototype
development
5.MarketTests
5.MarketTests
6.Commer-cialization
6.Commer-cialization
The New Product Development Process
Copyright © 2012 Pearson Canada Inc.8 - 11
New-Product Development Process
• Idea generation:– Internal sources:
• Company employees at all levels
– External sources:• Customers• Competitors• Distributors and suppliers• Others (including trade magazines and shows,
advertising agencies, marketing research firms, laboratories, and inventors)
Copyright © 2012 Pearson Canada Inc.8 - 12
New-Product Development Process
• Idea screening:– Process used to spot good ideas and drop
poor ones– Describe product or service, target market,
and competition– Estimate market size, price, development time
and costs, manufacturing costs, rate of return– Evaluate new-product ideas against a set of
company criteria
Copyright © 2012 Pearson Canada Inc.8 - 13
New-Product Development Process
• Concept development and testing:– Product concept:
• Detailed version of the new-product idea stated in meaningful consumer terms
– Concept testing: • Testing new-product concepts with groups of
potential consumers to find out if the concepts have strong consumer appeal
Copyright © 2012 Pearson Canada Inc.8 - 14
New-Product Development Process
• Marketing strategy development:– Involves designing an initial marketing
strategy and a three part marketing strategy statement
1. Describe the target market, planned value proposition, sales, market share, and profit goals
2. Outline the product’s planned price, distribution, and marketing budget
3. Describe the planned long-run sales and profit goals, marketing mix strategy
Copyright © 2012 Pearson Canada Inc.8 - 15
New-Product Development Process
• Business analysis:– Review of the sales, costs, and profit
projections to assess fit with company objectives
– If results are positive, project moves to the product development phase
Copyright © 2012 Pearson Canada Inc.8 - 16
New-Product Development Process
• Product development:– Develops concept into a physical product– Calls for a large investment– Prototypes are developed and tested– Prototypes must have required functional
features and convey psychological characteristics
Copyright © 2012 Pearson Canada Inc.8 - 17
New-Product Development Process
• Test-marketing:– Product and marketing program are
introduced into a realistic market setting– Not needed for all products– Provides marketing experience before going
to the expense of full introduction
• Commercialization:– Full-scale introduction of the product into the
market
Copyright © 2012 Pearson Canada Inc.8 - 18
Managing New-Product Development
• Customer centered approach:– Focuses on solving customer problems and
offers compelling customer value proposition
• Team-based approach:– Departments work together, overlapping steps
to save time and increase effectiveness
• Systematic approach:– Innovation management systems collect,
review, evaluate, manage new-product ideas
Copyright © 2012 Pearson Canada Inc.8 - 19
New Product Organization
Companies 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 the product manager with category managers
Copyright © 2012 Pearson Canada Inc.8 - 20
1. Ford’s Edsel automobile.2. Dupont’s Corfam synthetic leather.3. Polaroid’s Polavision.4. United Artist’s Heaven’s Gate western movie.5. RCA’s Videodisc.6. Time’s TV-Cable Week magazine.7. IBM’s PCjr.8. New Coke.9. R.J. Reynolds’ Premier cigarette.10. Nutrasweet’s Simplesse fat substitute.
Ten World-Class Product Failures
Copyright © 2012 Pearson Canada Inc.8 - 22
Product and Service Decisions
• Decisions about individual products involve:– Product attributes such as quality, features,
style and design– Packaging (bi-lingual in Canada)– Labeling (identify, describes, and promotes
brand)– Product support services (customer phone or
email)
Copyright © 2012 Pearson Canada Inc.8 - 23
Product and Service Decisions
• Decisions about product lines involve:– Product line length– Line filling or line stretching
• Product mix has four dimensions:– Width– Length– Depth– Consistency
Copyright © 2012 Pearson Canada Inc.8 - 24
Services Marketing
• Services are the most important industry in Canada’s economy and includes:– Government services, hospitals, military,
police, Canada Post, schools, not-for-profit organizations
– Business services segment (for-profit companies) such as banks, airlines, hotels, real-estate firms
Copyright © 2012 Pearson Canada Inc.8 - 25
Services Marketing
• Consider four characteristics when designing services marketing programs: