Marketing chapter 10a developing new products and services

●Purchased for use in production of other goods and services ●Sometimes called business goods, B2B goods, industrial goods, organizational or commercial goods ●Some products can be

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Recognize the various terms that pertain to products and services.

LO1

Identify the ways in which consumer and business goods can be classified.

Explain the significance of “newness”

in new products and services as it relates to the degree of consumer learning involved.

LO3

LO2

LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 10, YOU SHOULD BE ABLE TO:

10-2

Describe the factors contributing to a new product’s or service’s success or failure.

Explain the purposes of each step of the new-product process.

LO4

LO5

LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 10, YOU SHOULD BE ABLE TO:

10-3

NEW PRODUCT REVOLUTIONS:

APPLE AND ITS INNOVATION MACHINE

10-4

NEW PRODUCT REVOLUTIONS:

APPLE AND ITS INNOVATION MACHINE

10-5

THE VARIATION OF PRODUCTS PRODUCT, PRODUCT LINE, AND PRODUCT MIX

Slide 10-5

3M’S NEW GREPTILE GRIP GOLF

GLOVE: HOW TO GET TO THE TOP

OF THE LEADER BOARD

THE VARIATIONS OF PRODUCTS

Any physical good, service, or idea that satisfies a want or

need; plus anything that would enhance the product in the eyes

of the consumers, such as the

brand

PRODUCT

PRODUCT LINE & PRODUCT MIX

Slide 10-7

Little Remedies How does an extensive product line benefit

both consumers and retailers?

●Creation of real or perceived

differences

●Actual product differences are

sometimes quite small

●Marketers must create a unique, attractive image

PRODUCT DIFFERENTIATION

Little Remedies How does an extensive product line benefit

both consumers and retailers?

LO1

10-16

THE VARIATION OF PRODUCTS CLASSIFYING PRODUCTS

●Purchased for use in

production of other goods

and services

●Sometimes called business

goods, B2B goods, industrial

goods, organizational or

commercial goods

●Some products can be

considered both consumer

and business items

I Type Of User

CLASSIFYING CONSUMER AND

Slide 10-87

Convenience Goods

Convenience goods – items that

the consumer purchases frequently,

conveniently, and with a minimum of shopping effort.

Convenience goods – items that

the consumer purchases frequently,

conveniently, and with a minimum of

shopping effort.

Slide 10-88

Shopping Goods

Shopping Goods – items for

which the consumer compares

several alternatives on criteria,

such as price, quality, or style.

Shopping Goods – items for

which the consumer compares

several alternatives on criteria,

such as price, quality, or style.

Slide 10-89

Specialty Goods

Specialty Goods – items that a

consumer makes a special effort to

search out and buy.

Specialty Goods – items that a

consumer makes a special effort to

search out and buy.

Slide 10-90

Unsought Goods

Unsought Goods – items that the

consumer either does not know

about or knows about but does not

initially want.

Unsought Goods – items that the

consumer either does not know

about or knows about but does not

initially want.

FIGURE 10-1 How a consumer good is

classified affects what products consumers

buy and the marketing strategies used

10-25

Rolex Watch

What type of consumer good?

LO2

10-26

CLASSIFYING CONSUMER AND BUSINESS GOODS

CLASSIFYING BUSINESS GOODS

• Installations

• Accessory

Equipment

10-27

●Classification of Business Goods

●Major characteristic is that sales are

often result of derived demand

PRODUCT DIFFERENTIATION CLASSIFYING CONSUMER AND

BUSINESS GOODS

●Classification of Business Goods

BUSINESS GOODS

BUSINESS GOODS

●Support Goods

●Installations – buildings and fixed equipment

● Industrial buyers deal directly with

construction companies and

manufacturers through sales reps

● Pricing is often through competitive bidding

PRODUCT DIFFERENTIATION CLASSIFYING CONSUMER AND

BUSINESS GOODS

BUSINESS GOODS

●Support Goods

●Supplies

● Similar to consumer convenience

goods and purchased with little effort through straight rebuy e.g., copier

paper, brooms, paper clips

● Price and delivery are key factors

PRODUCT DIFFERENTIATION CLASSIFYING CONSUMER AND

BUSINESS GOODS

BUSINESS GOODS

THE VARIATION OF PRODUCTS CLASSIFYING PRODUCTS

1 Non-durable Goods

● Consumed in one or a few uses

● E.g., food products or fuel

● Tends to be inexpensive and purchased

frequently

● Consumer advertising and wide distribution

II Degree of Tangibility

2 Durable Goods

● Last over an extended number of uses

● E.g., appliances, automobiles

● Generally cost more and last longer

● Personal selling is important marketing

activity in answering consumer questions

II Degree of Tangibility, cont.

3 Services

● Intangible activities, benefits, or

satisfactions offered for sale

● E.g., marketing research, health care

● Special marketing needed to communicate

benefits to potential buyers

II Degree of Tangibility, cont.

● “New-product” development is often

difficult to observe step by step

III.Services and New-Product

Development

Slide 10-13

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 or services that 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.

Slide 10-14

Concept Check

2 What are the four main types of

consumer goods?

A: convenience goods, shopping

goods, specialty goods, and

unsought goods

Slide 10-15

Concept Check

3 To which type of good (business or

consumer) does the term derived

demand generally apply?

A: business

NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL

Slide 10-16

What is a New Product?

Slide 10-16

 Newness Compared with Existing Products

• What is a New Product?

 Newness in Legal Terms

 Newness from the Company’s Perspective

Slide 10-16

 Newness in Legal Terms (Regular

Distribution)

– FTC advises that term “new” be limited

to use with product up to six months

after entering into regular distribution

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

WHAT IS A NEW PRODUCT?

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

WHAT IS A NEW PRODUCT?

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

WHAT IS A NEW PRODUCT?

technology

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

WHAT IS A NEW PRODUCT?

NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL

Slide 10-16

Newness from the Consumer’s

Perspective

Classifies products according to the degree of

learning required by the consumer to use the

product properly:

A Continuous Innovation

B Dynamically Continuous Innovation

C Discontinuous Innovation

NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL

Slide 10-16

A Continuous Innovation

– No new behaviors must be learned

– Effective marketing depends on

generating awareness and having strong

distribution

– Not reeducating users

NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL

Slide 10-16

B Dynamically Continuous Innovation

– Minor changes in behavior are required

– Marketing strategy is to educate

prospective buyers on their benefits,

advantages, proper use

NEW PRODUCTS AND WHY THEY

– Marketing efforts involve gaining initial

consumer awareness and educating

consumers on both benefits and proper

use of the innovative product – $$$$$$$

FIGURE 10-2 The degree of “newness” in a

new product affects the amount of learning

effort consumers exert to use the product

10-58

MARKETING MATTERS

Bought a Computer, Lawn Mower, and

Dishwasher? Call the Geek Squad!

10-59

FIGURE 10-A What it takes to launch one

commercially successful new product

10-60

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

WHY PRODUCTS SUCCEED OR FAIL

LO4

 Marketing Reasons for New-Product

Failures

• Insignificant Points of Difference

• Incomplete Market and Product Definition Before Product Development Starts

 Protocol

• Too Little Market Attractiveness 10-61

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

WHY PRODUCTS SUCCEED OR FAIL

LO4

 Marketing Reasons for New-Product

Failures

• Poor Execution of the Marketing Mix

• Poor Product Quality or Sensitivity to

Customer Needs on Critical Factors

• Bad Timing

MARKETING MATTERS

What Separates New-Product

Winners and Losers?

10-65

FIGURE 10-3 Why did these two new

products fail?

10-66

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

WHY PRODUCTS SUCCEED OR FAIL

LO4

• Not Listening to the “Voice” of the Consumer

• Skipping Steps in the New-Product Process

 What Were They Thinking? Organizational

Problems in New-Product Failure

• Marketing a Poorly Conceived Product Too Quickly

• “Groupthink” in Task Force & Committee Meetings

• Not Learning Lessons From Past Failures

10-67

USING MARKETING DASHBOARDS

Monitoring Your New-Product Launch

Household (HH) Trial and Repeat Percents

10-68

The new-product process

consists of the stages a firm

goes through to identify business

opportunities and convert them

to a salable good or service

10-70

New Product Process

FIGURE 10-4 Stages in the new-product

process

10-71

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

10-72

New-Product Strategy Development

THE NEW-PRODUCT PROCESS NEW-PRODUCT STRATEGY DEVELOPMENT

Idea Generation

Idea generation is the stage

of the new-product process that

involves developing a pool of

concepts as candidates for new

products

10-74

THE NEW-PRODUCT PROCESS

IDEA GENERATION

LO5

 Employee and Co-Worker Suggestions

 Customer and Supplier Suggestions

 R&D Breakthroughs

 Competitive Products

 Universities, Inventors, and

Small Tech Firms

10-75

Screening and evaluation is

the stage of the new-product

process that involves internal

and external evaluations of the

new-product ideas to eliminate

those that warrant no further

effort

10-77

THE NEW-PRODUCT PROCESS Screening and Evaluation

THE NEW-PRODUCT PROCESS SCREENING AND EVALUATION

THE NEW-PRODUCT PROCESS BUSINESS ANALYSIS AND DEVELOPMENT

LO5

 Business Analysis

 Development

10-79

Business analysis is the stage

of the new-product process that

involves specifying the product

features and marketing strategy

and making necessary financial

Development is the stage of the

new-product process that involves turning the idea on paper into a

prototype

10-81

THE NEW-PRODUCT PROCESS

Development

Market testing is the stage of the new-product process that involves exposing actual products to

prospective consumers under

realistic purchase conditions to

see if they will buy

10-82

THE NEW-PRODUCT PROCESS

Market Testing

THE NEW-PRODUCT PROCESS

MARKET TESTING

LO5

 Test Marketing

 Simulated Test Markets (STMs)

 When Test Markets Don’t Work

 Services

 Expensive or Costly Products

10-83

FIGURE 10-5 Six important U.S test

markets

10-84

Commercialization is the stage

of the new-product process that

involves positioning and launching

a new product in full-scale

production and sales

10-85

THE NEW-PRODUCT PROCESS COMMERCIALIZATION

THE NEW-PRODUCT PROCESS COMMERCIALIZATION

A slotting fee is a payment a

manufacturer makes to place a

new item on a retailer’s shelf

10-87

THE NEW-PRODUCT PROCESS

Slotting Fee

A failure fee is a penalty

payment a manufacturer makes

to compensate a retailer for sales

its valuable shelf space failed to

make

10-88

THE NEW-PRODUCT PROCESS

Failure Fee

THE NEW-PRODUCT PROCESS COMMERCIALIZATION

LO5

 Regional Rollouts

10-89

THE NEW-PRODUCT PROCESS COMMERCIALIZATION

FIGURE 10-6 Marketing information and

methods used in each stage of the

new-product process

10-91

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

10-92

Product Line

A product line consists of 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.

10-93

Product Mix

A product mix consists of the

number of product lines offered

by a company

10-94

Consumer Goods

Consumer goods are products

purchased by the ultimate

consumer

10-95

Business Goods

Business goods are products

that assist directly or indirectly in

providing products for resale

Also called B2B goods, industrial

goods, or organizational goods.

10-96

Convenience Goods

Convenience goods are items

that the consumer purchases

frequently, conveniently, and with

a minimum of shopping effort

10-97

Shopping Goods

Shopping goods are items for

which the consumer compares

several alternatives on criteria,

such as price, quality, or style

10-98

Specialty Goods

Specialty goods are items that a

consumer makes a special effort

to search out and buy

10-99

Unsought Goods

Unsought goods are items that

the consumer either does not

know about or knows about but

does not initially want

100

10-Support Goods

Support goods are items used

to assist in producing other goods and services

102

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 the

product will be and do

103

10-New-Product Process

The new-product process

consists of the stages a firm

goes through to identify business

opportunities and convert them

to a salable good or service

104

10-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

105

10-Idea Generation

Idea generation is the stage

of the new-product process that

involves developing a pool of

concepts as candidates for new

products

106

10-Screening and Evaluation

Screening and evaluation is

the stage of the new-product

process that involves internal

and external evaluations of the

new-product ideas to eliminate

those that warrant no further

effort

107

10-Business Analysis

Business analysis is the stage

of the new-product process that

involves specifying the product

features and marketing strategy

and making necessary financial

projections needed to

commercialize a product

108

Development is the stage of the

new-product process that involves turning the idea on paper into a

prototype

109

10-Market Testing

Market testing is the stage of the

new-product process that involves exposing actual products to

prospective consumers under

realistic purchase conditions to

see if they will buy

110

Commercialization is the stage

of the new-product process that

involves positioning and launching

a new product in full-scale

production and sales

111

10-Slotting Fee

A slotting fee is a payment a

manufacturer makes to place a

new item on a retailer’s shelf

112

10-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

113