1. Developing New Products and Services

2. Product Definitions Product –A good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfy consumers and is received in exchange for money or some other unit of value. –Can be consumer or business good

3. Product Definitions Product Line –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

4. Product Definitions Product lines usually have their own marketing strategy Ex: Little Remedies by Vetco, Inc. Product items are within each product line –A specific product by brand, size, price, etc. –Each specific product has it’s own SKU (stock keeping unit)

5. Product Definitions Product Mix –Number of product lines offered by a company Proctor & Gamble

6. Classifying Products Two ways to classify products –Type of User –Degree of Product Tangibility

7. Classifying Products Type of User –Consumer goods Products purchased by the ultimate consumer –Business goods Products that assist in directly or indirectly in providing products for resale –Some products are both a consumer good and a business good

8. Classifying Products Degree of Tangibility –Nondurable Goods are items consumed in one or a few uses Food, fuel –Durable Goods are items that usually last over an extended number of uses Appliances, cars, electronic equipment –Services are activities, benefits, or satisfactions offered for sale Marketing research, health care, education

9. Consumer Goods Consumer goods differ in terms of: –How much effort the consumer puts into the buying decision –What attributes are involved in the purchase –The frequency of the purchase

10. Consumer Goods Convenience Goods –Items that are purchased frequently, conveniently, and with little shopping effort Shopping Goods –Items that the consumer compares several alternatives criteria (price, quality, style, etc.)

11. Consumer Goods Specialty Goods –Items that a consumer makes a special effort to search out and buy Unsought Goods –Items that the consumer either does not know about or knows about but does not initially want

12. Consumer Goods

13. Craftsman Tools Extended Warranty

14. Consumer Goods

15. Business Goods Sales are usually the result of a derived demand –Sales of business goods frequently result from the sale of consumer goods –Ford cars sales increase, so Ford buys more paint spraying equipment

16. Business Goods Production Goods are items that are used in the manufacturing process of the final product –Raw materials (grain, wood, component parts)

17. Business Goods Support Goods are items that are used to assist in producing other goods/services –The company building –Tools and office equipment –Supplies (paper, brooms, small office supplies) –Tax or legal counsel

18. New Products Newness Compared with Existing Products –Functionally different from already existing products –Can be completely new or additional features just added –Hybrid Cars

19. New Products Newness in Legal Terms –Cannot be termed “new” after six months of regular distribution –What is regular distribution?

20. New Products Newness from the Company’s Perspective –Product Line Extension: Improve an existing product, little risk involved Nutro Lamb & Rice dog food –Significant jump in innovation or technology 8-tracks to cassettes, cassettes to cd, cd to MP3 –Complete new product

21. New Products Newness from the Consumer’s Perspective –How is consumption changed? –Continuous Innovation No new behaviors must be learned (televisions) –Dynamically Continuous Innovation Minor changes in behavior are required –Discontinuous Innovation Consumer must learn entire new consumption pattern

22. New-Product Failures: Marketing Reasons Insignificant Point of Difference –Something has to be different about your product as compared to competition –General Mills Fingos Incomplete Market and Product Definition Before Product Development Starts –Company didn’t know target market, consumer wants/needs

23. Too Little Market Attractiveness –The ideal market has a large target market with tons of buyer need –Many times the target market you’ve found is too small and can’t provide enough sales to keep a new product afloat Kodak Ultralife lithium battery –10-year shelf life, lasts twice as long as alkaline –Only available as 9-volt, 10% of US battery market New-Product Failures: Marketing Reasons

24. Poor Execution of Marketing Mix –Movie names –Not promoted to correct market –Not available where target market shops New-Product Failures: Marketing Reasons

25. Poor Product Quality or Sensitivity to Customer Needs on Critical Factors Bad Timing –Too soon, too late, consumer tastes are quickly changing –Other companies may be quicker, better New-Product Failures: Marketing Reasons

26. No Economical Access to Buyers –Exposure in supercenters –New products have to “knock out” existing products out of shelf space New-Product Failures: Marketing Reasons

27. Hey! There’s A Monster In My Room! New-Product Failures: Marketing Reasons

28. New Product Process

29. New Product Process – Step #1 New Product Strategy Development Defines role for new product in terms of overall corporate objectives Use environmental scanning to identify possible opportunities or threats Identify your own strengths and weaknesses Determine new product ideas Identify potential markets for products

30. New Product Process – Step #1 New Product Strategy Development Cross Functional Teams are instrumental in this stage –A small number of people from different departments in an organization who are mutually accountable to a common set of performance goals

31. New Product Process – Step #2 Idea Generation Develop several concepts as potential new products Ideas can be generated by customers, suppliers, employees, basic research and development, and competitors

32. New Product Process – Step #2 Idea Generation Customer complaints (customer service calls) Employee suggestion boxes, contests for good ideas Professional research labs Determine internal strengths and weaknesses by watching and evaluating competition

33. New Product Process – Step #2 Idea Generation Volvo –Gained ideas from external female focus groups (customers or potential customers) –Created an all-female design team to create a Volvo concept car Doors pop up Car “fits” driver Parallel parking guide Clean

34. New Product Process – Step #3 Screening and Evaluation Determines which concepts to act on and which to leave behind Internal evaluation –Make sure concepts meet new product objectives External evaluation –Test idea with potential customers –Better for existing products (improvements) –Descriptions, sketches, brochures, ask questions

35. New Product Process – Step #4 Business Analysis Specify product features Develop marketing strategies Develop financial projections Last “checkpoint” for development Product is analyzed in terms of how the marketing efforts will support it and to see if it will help sales of existing products

36. New Product Process – Step #4 Business Analysis Can the new product be sold using existing channels or will new channels be created? Look at projections of –# of units sold –Research and development costs –Production –Marketing actions Can new product be patented or copyrighted?

37. New Product Process – Step #5 Development Development is where the new product is made into a prototype –A full-scale operating model of the product under development Perform lab tests and consumer tests on prototype or actual product Design is an important issue

38. New Product Process – Step #5 Development Eli Lilly Example –Many pharmaceutical products never make it to the market –Eli Lilly takes failed drugs and analyzes them to see what part of the drug failed –Chemotherapy drug failed, found out it was because depleted folic acid, so take it in combination with folic acid pill Barbie

39. New Product Process – Step #6 Market Testing Exposes the actual product to potential customers under realistic purchase conditions to see if they will buy again –Test Marketing –Simulated Test Markets

40. New Product Process – Step #6 Market Testing – Test Marketing Offers a product for sale on a limited basis in a defined area See if people will actually buy product Also trys out various marketing efforts

41. New Product Process – Step #6 Market Testing – Test Marketing Find a city that is representative of U.S. as a whole in terms of demographics Want cities with similar purchase patterns of the rest of the U.S., that has low cost advertising, and with the ability to track the advertising efforts

42. New Product Process – Step #6 Market Testing – Test Marketing Example –Proctor and Gamble – Tide Mountain Spring detergent Test marketed in LA, San Diego, Phoenix, Tucson Found out people wanted a bigger selection of scents in a laundry detergent

43. New Product Process – Step #6 Market Testing – Test Marketing What does test marketing do? –Indicates sales volume and market share of test area –Gives indications of price, place, and promotion

44. New Product Process – Step #6 Market Testing – Test Marketing Disadvantages –Time involved –Expensive –Not confidential Competition can see what you are doing, may steal idea or interfere with efforts

45. New Product Process – Step #6 Market Testing – Simulated Test Markets A full-scale test market in a limited fashion Often run in shopping malls –Asks questions about product usage, reason for purchasing, product attributes –Show tv and/or print ads of both the product and competition’s product –Pays the potential customer

46. New Product Process – Step #6 When Test Markets Don’t Work Not recommended for services Not recommended for expensive products like cars, computers – use prototypes

47. New Product Process – Step #7 Commercialization Involves positioning and launching a new product in full-scale production and sales Most expensive stage Regional rollouts – releasing products into geographic areas at different times, allows production and marketing actions to build

48. New Product Process – Step #7 Commercialization Risks and Uncertainties Slotting fees – usually supermarkets require these for new product placement on their shelves; expensive Failure fees – if sales do not reach a predetermined amount, a penalty can be charged

49. New Product Process – Step #7 Commercialization – Burger King Example McDonald’s french fries viewed as the best BK decided to “outdo” McDonald’s fries –Beat McDonald’s in taste tests –Launched new fries –BK restaurants couldn’t get frying process right, fries weren’t good –Launched another new fry a couple years later that was easier to fry

50. New Product Process