DEVELOPING NEW PRODUCTS AND SERVICES CHAPTER DEVELOPING NEW PRODUCTS AND SERVICES

Product Item Product Line Product Mix Product Items, Lines, and Mixes Product Item Product Line Product Mix A specific version of an organization’s products. A group of closely-related product items. All products that an organization sells. (SKU) Each has a unique number and bar code

Classifying Products Type of User Degree of Tangibility Consumer Goods Business Goods Degree of Tangibility Nondurable Good-used up in a few uses Durable Good-lasts over many uses Examples?? Services

The Characteristics of Services Intangibility Inseparability Heterogeneity Perishability Services that cannot be touched, seen, tasted, heard, or felt in the same manner as goods. A characteristic of services that allows them to be produced and consumed simultaneously. A characteristic of services that makes them less standardized and uniform than goods. A characteristics of services that prevents them from being stored, warehoused, or inventoried.

THE VARIATIONS OF PRODUCTS Intangibility Inseparability Inconsistency Inventory Idle Production Capacity- like stock out costs and holding costs for goods The Four I’s of Services Can be reduced by using commission and part time workers

CLASSIFYING GOODS AND SERVICES Convenience Product Shopping Specialty Unsought A relatively inexpensive item that merits little shopping effort. A product that requires comparison shopping, because it is usually more expensive and found in fewer stores. A particular item that consumers search extensively for and are reluctant to accept substitutes. A product unknown to the potential buyer or a known product that the buyer does not actively seek.

Classification of consumer goods

Why new-product development can be a dice roll: some forecasts These quotations—from very knowledgeable people—were made at the time these four new inventions appeared in the marketplace. The quotations show the difficulty of forecasting future technological revolutions—those usually involving discontinuous innovations.

What Is A New Product Functionally Different from Existing Products FTC: Newness = 6 Months or less After Regular Distribution Company: Simply Anything Different

FIGURE 10-D What it takes to launch one commercially successful new product The thousands of product failures that occur every year cost American business billions of dollars. Research research summarized in this figure suggests that it takes about 3,000 raw unwritten ideas to produce a single commercially successful new product.

Reasons for New Product Failures Bad Timing Too Little Market Attractiveness Poor Execution of the Marketing Mix: Name, Price, Promotion, and Distribution No Access to Buyers Insignificant Point of Difference Poor Product Quality Insensitivity to Customer Needs on Critical Factors

Why Did These Products Fail?

Why did this new product fail?

Stages in the New Development Process

Strategic roles of most successful new products Booz, Allen, and Hamilton, a global consulting firm, asked firms what strategic role was served by their most successful recent product. These roles, shown in the figure, help define the direction of new-product development in terms of externally- and internally-driven factors.

THE NEW-PRODUCT PROCESS- Idea Generation Customer and Supplier Suggestions Employee and Co-Worker Suggestions Research and Development Breakthroughs Competitive Products

THE NEW-PRODUCT PROCESS- Screening and Evaluation The first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s new-product strategy or are inappropriate for some other reason.

THE NEW-PRODUCT PROCESS- Business Analysis if positive, build a prototype Considerations in Business Analysis Stage Demand Cost Sales Profitability

THE NEW-PRODUCT PROCESS-Development Safety Tests “Failure Analysis” Marketing strategy Packaging, branding, labeling Manufacturing feasibility Final government approvals if needed

THE NEW-PRODUCT PROCESS- Test Marketing The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation.

When Test Markets Don’t Work Limited time to market Service nature of the item Time to see product benefit is long Number of units produced is small

Six important U.S. test markets “demographics winner”: Wichita Falls, Texas, metropolitan statistical area

THE NEW-PRODUCT PROCESS- Commercialization Most expensive stage Ramp Up and Regional Rollouts Product Positioning is marketing’s job here Speed as a Factor in New-Product Success Time to Market- important high tech items Parallel Development – Gantt chart usage Fast Prototyping – do it, try it, fix it

To Review: The New Product Process

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.

Product Line A product line is 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.

Product Mix The product mix is the number of product lines offered by a company.

Consumer Goods Consumer goods are products purchased by the ultimate consumer.

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.

Services Services are intangible activities or benefits that an organization provides to consumers in exchange for money or something else of value.

Idle Production Capacity Idle production capacity occurs when the service provider is available but there is no demand.

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.