© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 10-2 DEVELOPING NEW PRODUCTS AND SERVICES C HAPTER

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide M’S NEW GREPTILE GRIP GOLF GLOVE: HOW TO GET TO THE TOP OF THE LEADER BOARD The Product? The Target Market? The Special Marketing Task?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE VARIATIONS OF PRODUCTS Slide 10-6 Product  Product Line Product Line  Product Mix Product Mix Product Line and Product Mix Product Item Stock Keeping Unit (SKU)

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 10-7 Little Remedies How does an extensive product line benefit both consumers and retailers?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE VARIATIONS OF PRODUCTS Slide 10-8  Type of User  Degree of Tangibility Classifying Products Consumer Goods Consumer Goods Business Goods Nondurable Good Durable Good Services  Services and New-Product Development

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CLASSIFYING CONSUMER AND BUSINESS GOODS Slide 10-9  Convenience Goods Convenience Goods Classification of Consumer Goods  Shopping Goods Shopping Goods  Specialty Goods Specialty Goods  Unsought Goods Unsought Goods

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-1 FIGURE 10-1 Classification of consumer goods

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Raymond Weil Watch What type of consumer good?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CLASSIFYING CONSUMER AND BUSINESS GOODS Slide  Production Goods Production Goods Classification of Business Goods  Support Goods Support Goods Installations Accessory Equipment Supplies Industrial Services

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Slide  Newness Compared with Existing Products What is a New Product?  Newness in Legal Terms (Regular Distribution?)  Newness from the Company’s Perspective Regular Distribution

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Sony’s PlayStation 2 and Microsoft’s Xbox How does the term “new” apply? XboxPS2

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide MARKETING NEWSNET Blindsided in the Twenty-First Century— The Convergence of Digital Devices

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Slide What is a New Product? Continuous Innovation  Newness from the Consumer’s Perspective Dynamically Continuous Innovation Discontinuous Innovation

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-2 FIGURE 10-2 Consumption effects define newness

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Slide Why Products Succeed or Fail Insignificant Point of Difference  Marketing Reasons for New-Product Failures

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-B FIGURE 10-B What it takes to launch one commercially successful new product

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide MARKETING NEWSNET What Separates New-Product Winners and Losers

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Slide Why Products Succeed or Fail  Marketing Reasons for New-Product Failures Too Little Market Attractiveness Incomplete Market and Product Definition Before Product Development Starts  Protocol Protocol Poor Execution of the Marketing Mix: Name, Price, Promotion, and Distribution

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Slide Why Products Succeed or Fail  Marketing Reasons for New-Product Failures Bad Timing Poor Product Quality or Insensitivity to Customer Needs on Critical Factors No Economic Access to Buyers  A Look at Some Failures

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide MARKETING NEWSNET When Less is More— How Reducing the Number of Features Can Open Up Huge Markets

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Concept Check 1. From a consumer’s viewpoint, what kind of innovation would an improved electric toothbrush be? A: continuous innovation

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-4 FIGURE 10-4 Stages in the new-product process

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-C FIGURE 10-C Strategic roles of most successful new products

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NEW-PRODUCT PROCESS Slide  Customer and Supplier Suggestions Idea Generation  Employee and Co-Worker Suggestions  Research and Development Breakthroughs  Competitive Products

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Volvo’s YCC How are new-product ideas generated?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NEW-PRODUCT PROCESS Slide  Internal Approach Screening and Evaluation Concept Tests  External Approach

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide M Post-it Flag Highlighter How are new-product ideas screened & evaluated? += 3M Post-it Flag Highlighters 3M Post-it NotesFelt Tip Highlighters

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Frito-Lay Natural Snacks How are new-product ideas screened & evaluated?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NEW-PRODUCT PROCESS Slide  Prototype Business Analysis Development

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Mattel’s Barbie Why should laboratory and safety tests be done?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide ETHICS AND SOCIAL RESPONSIBILITY ALERT SUVs and Pickups versus Cars— Godzilla Meets a Chimp?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NEW-PRODUCT PROCESS Slide  Test Marketing Market Testing  Simulated (or Laboratory) Test Markets (STM)  When Test Markets Don’t Work

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-5 FIGURE 10-5 Six important U.S. test markets and the “demographics winner”: Wichita Falls, Texas, metropolitan statistical area

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NEW-PRODUCT PROCESS Slide  Burger King’s French Fries: The Complexities of Commercialization Commercialization  Speed as a Factor in New-Product Success  The Risks and Uncertainties of the Commercialization Stage Slotting Fee Failure Fee Time to Market (TtM) Parallel Development Fast Prototyping

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-6 FIGURE 10-6 Marketing information and methods used in the new-product process

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Burger King French Fries Why is commercialization risky?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Hewlett-Packard Cross-Functional Team Why is time to market (TtM) important?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-D FIGURE 10-D Five alternative structures for product development projects

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-E FIGURE 10-E Overall performance of five structures for product development projects

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Product Mix The product mix is the number of product lines offered by a company.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Consumer Goods Consumer goods are products purchased by the ultimate consumer.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Convenience Goods Convenience goods are items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Shopping Goods Shopping goods are items for which the consumer compares several alternatives on criteria, such as price, quality, or style.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Specialty Goods Specialty goods are items that a consumer makes a special effort to search out and buy.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Unsought Goods Unsought goods are items that the consumer either does not know about or knows about but does not initially want.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Production Goods Production goods are items used in the manufacturing process that become part of the final product.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Support Goods Support goods are items used to assist in producing other goods and services.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Protocol 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Six Sigma Six Sigma is a means to “delight the customer” by achieving quality through a highly disciplined process to focus on developing and delivering near-perfect products and services.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Idea Generation Idea generation is the stage of the new- product process that involves developing a pool of concepts as candidates for new products.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Development Development is the stage of the new- product process that involves turning the idea on paper into a prototype.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Commercialization Commercialization is the stage of the new-product process that involves positioning and launching a new product in full-scale production and sales.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Slotting Fee A slotting fee is a payment a manufacturer makes to place a new item on a retailer’s shelf.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 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.