1. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin DEVELOPING NEW PRODUCTS AND SERVICES 10 C HAPTER

2. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Understand the ways in which consumer and business goods and services can be classified and marketed. Explain the implications of alternative ways of viewing “newness” in new products. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

3. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Analyze the factors contributing to a product’s success or failure. Recognize and understand the purposes of each step of the new-product process. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

4. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 3M: CONTINUOUS INNOVATION + GENUINE BENEFITS = SATISFIED CUSTOMERS DEVELOPING NEW PRODUCTS AND SERVICES

5. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Product Line and Product Mix Classifying Products Type of User  Consumer goods Consumer goods  Business goods Business goods Degree of Tangibility Services and New-Product Development THE VARIATIONS OF PRODUCTS

6. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Classification of Consumer Goods  Convenience goods Convenience goods  Shopping goods Shopping goods  Specialty goods Specialty goods  Unsought goods Unsought goods CLASSIFYING CONSUMER AND BUSINESS GOODS

7. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Classification of Business Goods  Production Goods Production Goods  Support Goods Support Goods  Installations  Accessory Equipment  Supplies  Services CLASSIFYING CONSUMER AND BUSINESS GOODS

8. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. Explain the difference between product mix and product line. A: Product mix is the number of products lines offered by a company; product line is a group of closely related products 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.

9. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. What are the four main types of consumer good? A: Convenience, shopping, specialty, and unsought goods

10. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 3. To which type of good (business or consumer) does the term derived demand generally apply? A: Business good

11. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What is a New Product? Newness Compared with Existing Products Newness in Legal Terms Newness from the Company’s Perspective Newness from the Consumer’s Perspective NEW PRODUCTS AND WHY THEY SUCCEED AND FAIL

12. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Marketing Reasons for Failures  Insignificant “point of difference”  Incomplete market and product definition (Protocol) (Protocol)  Too little market attractiveness  Poor execution of the marketing mix  Poor product quality or sensitivity  Bad timing  No economical access to buyers NEW PRODUCTS AND WHY THEY SUCCEED AND FAIL

13. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A Look at Some Failures  Kimberly Clark’s Avert Virucidal Tissues  Out International’s Hey! NEW PRODUCTS AND WHY THEY SUCCEED AND FAIL

14. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. From a consumer’s viewpoint, what kind of innovation would an improved electric toothbrush be? A: Continuous innovation

15. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. What does “insignificant point of difference” mean as a reason for new- product failure? A: The expected benefit compared with competitors’ offerings is not that important.

16. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin New-Product Strategy DevelopmentNew-Product Strategy Objectives of the Stage: Identify Markets and Strategic Roles 3M: Cross-Functional Teams, Six Sigma, and Lead UsersSix Sigma THE NEW-PRODUCT PROCESS

17. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Idea Generation Customer and Supplier Suggestions Employee and Co-Worker Suggestions Research and Development Breakthroughs Competitive Products THE NEW-PRODUCT PROCESS

18. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Screening and Evaluation Internal Approach External Approach THE NEW-PRODUCT PROCESS

19. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. What step in the new-product process has been added in recent years? A: New product strategy development.

20. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. What are four sources of new-product ideas? A: Customer and supplier suggestions, employee and co-worker suggestions, research and development, competitive products

21. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 3. What is the difference between internal and external screening and evaluation approaches used by a firm in the new-product process? A: In internal screening, company employees evaluate the technical feasibility of new- product ideas, whereas in external screening, evaluation consists of preliminary testing of the concept with consumers rather than the actual product.

22. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Business Analysis Development Market Testing Test Marketing THE NEW-PRODUCT PROCESS

23. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Market Testing (cont) Simulated Test Markets When Test Markets Don’t Work THE NEW-PRODUCT PROCESS

24. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Commercialization Burger King’s French Fries: The Complexities of Commercialization The Risks and Uncertainties of the Commercialization Stage  Slotting fee Slotting fee  Failure fee Failure fee Speed as a Factor in New-Product Process THE NEW-PRODUCT PROCESS

25. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 1. How does the development stage of the new-product process involve testing the product inside and outside the firm? A: Internally, laboratory tests are done to see if the product achieves the physical standards. Externally, consumer tests are done.

26. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 2. What is a test market? A: A test done to determine whether consumers will actually buy the product and to try different ways of marketing it.

27. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Concept Check 3. What is the commercialization of a new product? A: Positioning and launching the product in full-scale production and sales.

28. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers and is received in exchanges for money or some other unit of value. Product

29. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 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 outlets, or fall within a given price range. Product Line

30. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Products purchased by the ultimate consumer. Consumer Goods

31. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Products that assist directly or indirectly in providing products for resale. Business Goods

32. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Items that the consumer purchases frequently and with a minimum of shopping effort. Convenience Goods

33. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Items for which the consumer compares several alternatives on criteria such as price, quality, or style. Shopping Goods

34. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Items that a consumer makes a special effort to search out and buy. Specialty Goods

35. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Items that the consumer either does not know about or knows about but does not initially want. Unsought Goods

36. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Items used in the manufacturing process that become part of the final product. Production Goods

37. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Items used to assist in producing other goods and services. Support Goods

38. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A statement that, before product development begins, identifies (1) a well- defined target market; (2) specific customer’ needs, wants, and preferences; an (3) what the product will do. Protocol

39. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The sequence of activities a firm uses to identify business opportunities and convert them to a salable good or service. New-Product Process

40. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Defining the role for a new product in terms of the firm’s overall corporate objectives. New-Product Strategy Development

41. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 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. Six Sigma

42. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Developing a pool of concepts as candidates for new products. Idea Generation

43. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The third stage of the new product process which involves internal and external evaluations of the new-product ideas to eliminate those that warrant no further effort. Screening and Evaluation

44. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Involves specifying the features of the product and the marketing strategy needed to commercialize it and making necessary financial projections. Business Analysis

45. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Turning the idea on paper into a prototype. Development

46. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy. Market Testing

47. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Positioning and launching a new product in full-scale production and sales. Commercialization

48. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Payment manufacturer makes to place a new item on a retailer’s shelf. Slotting Fee

49. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A penalty payment made by a manufacturer to compensate the retailer for sales its valuable shelf space never made. Failure Fee