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Recognize the terms that pertain to products and services. LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 9, YOU SHOULD BE ABLE TO: LO1 Recognize the terms that pertain to products and services. LO2 Identify the ways to classify consumer and business products. LO3 Describe four unique elements of services. Explain the significance of “newness” and “consumer learning” to new products and services. LO4 9-2

Explain the purposes of each step of the new-product process. LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 9, YOU SHOULD BE ABLE TO: Describe the factors affecting the success or failure of a new product or service. LO5 LO6 Explain the purposes of each step of the new-product process. 9-3

APPLE’S NEW-PRODUCT INNOVATION MACHINE 9-4

APPLE’S NEW PRODUCTS Apple’s Innovation Machine Apple Macintosh image courtesy of Wikipedia. iCloud: Where the Digital Lifestyle is Heading 9-5

WHAT ARE PRODUCTS AND SERVICES? A LOOK AT GOODS, SERVICES, AND IDEAS Nondurable Goods Ideas Durable Goods 9-6

FIGURE 9-A The service continuum shows how offerings can vary in their balance of products and services 9-7

WHAT ARE PRODUCTS AND SERVICES? CLASSIFYING PRODUCTS LO2 Consumer Products Business Products 9-8

WHAT ARE PRODUCTS AND SERVICES? CLASSIFYING PRODUCTS LO2 Consumer Products Convenience Products Shopping Products Specialty Products Unsought Products 9-9

FIGURE 9-1 How a consumer product is classified affects which products consumers buy and the marketing strategies used 9-10

WHAT ARE PRODUCTS AND SERVICES? CLASSIFYING PRODUCTS LO2 Business Products Derived Demand Components Support Products Installations Supplies Accessory Equipment Industrial Services 9-11

WHAT ARE PRODUCTS AND SERVICES? CLASSIFYING SERVICES LO2 Delivery by People or Equipment Delivery by Business Firms or Nonprofit Organizations Delivery by Government Agencies 9-12

FIGURE 9-2 Services can be classified as equipment-based or people-based 9-13

WHAT ARE PRODUCTS AND SERVICES? THE UNIQUENESS OF SERVICES LO3 Four I’s of Services Intangibility Inseparability Inconsistency Inventory Idle Production Capacity Product/Service Offering Core Supplementary 9-14

WHAT ARE PRODUCTS AND SERVICES? THE UNIQUENESS OF SERVICES LO3 Assessing Service Quality Gap Analysis Monitoring Service Failure 9-15

FIGURE 9-3 The five dimensions of service quality 9-16

WHAT ARE PRODUCTS AND SERVICES? THE UNIQUENESS OF SERVICES LO3 Customer Contact Audits Service Encounters Customer Contact Audit A Customer’s Car Rental Activities 9-17

FIGURE 9-B Customer contact audit for a car rental agency (green boxes = customer activity; orange boxes = employee activity) 9-18

Product Item Product Line Product Mix WHAT ARE PRODUCTS AND SERVICES? PRODUCT ITEMS, LINES, MIXES, CLASSES AND FORMS LO3 Product Item Stock Keeping Unit (SKU) Product Line Product Mix 9-19

Product Class Product Form WHAT ARE PRODUCTS AND SERVICES? PRODUCT ITEMS, LINES, MIXES, CLASSES AND FORMS LO3 Product Class Product Form 9-20

Little Remedies How does a broad product line benefit both consumers and retailers? LO3 9-21

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHAT IS A NEW PRODUCT? LO4 Newness: Compared to Existing Products 9-22

MARKETING MATTERS Feature Bloat: Geek Squad to the Rescue! 9-23

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHAT IS A NEW PRODUCT? LO4 Newness: The Consumer’s Perspective Continuous Innovation Dynamically Continuous Innovation Discontinuous Innovation Newness in Legal Terms 9-24

FIGURE 9-4 The degree of “newness” in a new product affects the amount of learning effort consumers exert to use the product 9-25

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHAT IS A NEW PRODUCT? LO4 Newness: The Organization’s Perspective Product Line Extension Jump in Innovation 9-26

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHAT IS A NEW PRODUCT? LO4 Newness: The Organization’s Perspective Brand Extension True Innovation 9-27

Purina Elegant Medleys What are the potential benefits and dangers of product line extensions? LO4 9-28

FIGURE 9-C What it takes to launch one commercially successful new product 9-29

FIGURE 9-D What separates new-product winners and losers 9-30

Marketing Reasons for New-Product Failures NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHY PRODUCTS & SERVICES SUCCEED OR FAIL LO5 Marketing Reasons for New-Product Failures Insignificant Points of Difference No Economical Access to Buyers Incomplete Market and Product Protocol Before Product Development Starts Not Satisfying Customer Needs on Critical Factors 9-31

Marketing Reasons for New-Product Failures NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHY PRODUCTS & SERVICES SUCCEED OR FAIL LO5 Marketing Reasons for New-Product Failures Bad Timing Poor Product Quality Too Little Market Attractiveness Poor Execution of the Marketing Mix 9-32

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHY PRODUCTS & SERVICES SUCCEED OR FAIL LO5 What Were They Thinking? Organizational Problems in New-Product Failure Not Listening to the “Voice” of the Consumer Skipping Stages in the New-Product Process Marketing a Poorly Conceived Product Too Quickly Encountering “Groupthink” in Meetings Not Learning Lessons From Past Failures Avoiding the “NIH Problem” 9-33

Fingos & Thirsty Dog/Thirsty Cat Why did these products fail? LO5 9-34

Avert, Monster in My Room, and Life Saver Why did these products fail? LO5 9-35

USING MARKETING DASHBOARDS Which States are Underperforming? LO5 Annual Percent Change in Unit Volume by State Change in Growth < 0% 0 to 10% > 10% 9-36

FIGURE 9-5 Seven stages in the new-product process leading to success 9-37

THE NEW-PRODUCT PROCESS STAGE 1: NEW-PRODUCT STRATEGY DEVELOPMENT Stage Gate Process New-Product Strategy Development Strategic Role Defined SWOT Analysis/Scanning Conducted Protocol Defined Service Development Difficult 9-38

FIGURE 9-E Strategic roles of most successful new products 9-39

THE NEW-PRODUCT PROCESS STAGE 2: IDEA GENERATION LO6 Idea Generation Open Innovation Employee and Co-Worker Suggestions Customer and Supplier Suggestions Tide Pods Ad Crowdsourcing 9-40

THE NEW-PRODUCT PROCESS STAGE 2: IDEA GENERATION LO6 Research & Development Laboratories Industrial Design Outside Labs 9-41

THE NEW-PRODUCT PROCESS STAGE 2: IDEA GENERATION LO6 Competitive Products Smaller Firms Universities Inventors 9-42

THE NEW-PRODUCT PROCESS STAGE 3: SCREENING AND EVALUATION LO6 Screening and Evaluation Internal Approach Customer Experience Management (CEM) External Approach Concept Tests 9-43

THE NEW-PRODUCT PROCESS STAGE 4: BUSINESS ANALYSIS LO6 Business Analysis Prototype Business Fit Capacity Management Off-Peak Pricing 9-44

THE NEW-PRODUCT PROCESS STAGE 5: DEVELOPMENT Example: Chobani Yogurt Service Encounters Safety Tests 9-45

MARKETING MATTERS Marissa Mayer: The Talent Behind Google’s Familiar White Home Page LO6 9-46

THE NEW-PRODUCT PROCESS STAGE 6: MARKET TESTING LO6 Market Testing Test Marketing Standard Test Markets Controlled Test Markets Simulated Test Markets (STMs) When Test Markets Don’t Work 9-47

THE NEW-PRODUCT PROCESS STAGE 7: COMMERCIALIZATION LO6 Commercialization Regional Rollouts Burger King’s French Fries Risks with Grocery Products Slotting Fee Failure Fee 9-48

THE NEW-PRODUCT PROCESS STAGE 7: COMMERCIALIZATION LO6 Speed as a Factor in New-Product Success Time to Market (TtM) Parallel Development Fast Prototyping 9-49

GENERAL MILLS WARM DELIGHTS™: INDULGENT, DELICIOUS, AND GOOEY! VIDEO CASE 9 9-50

VIDEO CASE 9 WARM DELIGHTS 1. What is the competitive set of desserts in which Warm Delights is located? 9-51

VIDEO CASE 9 WARM DELIGHTS 2. (a) Who is the target market? (b) What is the point of difference on the positioning for Warm Delights? (c) What are the potential opportunities and hindrances of the target market and positioning? 9-52

VIDEO CASE 9 WARM DELIGHTS 3. (a) What marketing research did Vivian Callaway execute? (b) What were the critical questions that she sought research and expert advice to get answers to? (c) How did this affect the product’s marketing mix price, promotion, packaging, and distribution decisions? 9-53

VIDEO CASE 9 WARM DELIGHTS 4. (a) What initial promotional plan directed to consumers in the target market did Callaway use? (b) Why did this make sense to Callaway and her team when Warm Delights was launched? 9-54

VIDEO CASE 9 WARM DELIGHTS 5. If you were a consultant to Vivian Callaway, what product changes would you recommend to increase sales of Warm Delights? 9-55

Product A product is a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers’ needs and is received in exchange for money or something else of value. 9-56

Services Services are the intangible activities or benefits that an organization provides to satisfy consumers’ needs in exchange money or something else of value. 9-57

Consumer products are products purchased by the ultimate consumer. 9-58

Business Products Business products are products organizations buy that assist in providing other products for resale. Also called B2B products or industrial products. 9-59

Four I’s of Services The four I’s of services consists of the four unique elements that distinguish services from goods: intangibility, inconsistency, inseparability, and inventory. 9-60

Idle Production Capacity Idle production capacity occurs when the service provider is available but there is no demand for the service. 9-61

Product Item A product item is a specific product that has a unique brand, size, or price. 9-62

Product Line A product line is a group of product or service items 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 outlets, or fall within a given price range. 9-63

Product Mix A product mix consists of all of the product lines offered by an organization. 9-64

New-Product Process The new-product process consists of the seven stages an organization goes through to identify business opportunities and convert them to salable products or services. 9-65

Customer Experience Management (CEM) Customer experience management (CEM) is the process of managing the entire customer experience within the firm. 9-66