CH10

Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-1

DEVELOPING NEW PRODUCTS

AND SERVICES

CHAPTER


AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO:

1. Recognize the various terms that pertain to products and services.

2. Identify the ways in which consumer and business goods and services can be classified.

3. Explain the significance of “newness” in new products and services as it relates to the degree of consumer learning involved.


AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO:

4. Describe the factors contributing a new product’s or service’s success or failure.

5. Explain the purposes of each step of the new-product process.


3M’S NEW GREPTILE GRIP GOLF GLOVE: HOW TO GET TO THE TOP

OF THE LEADER BOARD

• The Product?

• The TargetMarket?

• The SpecialMarketing Task?


THE VARIATIONS OF PRODUCTS

• Product

Product Line

Product Mix

• Product Line and Product Mix

• Product Item

• Stock Keeping Unit (SKU)


Little Remedies How does an extensive product line benefit

both consumers and retailers?



Type of User

Degree of Tangibility

• Classifying Products

• Consumer Goods • Business Goods

• Nondurable Good

• Durable Good

• Services



• The Uniqueness of Services

Intangibility

Inconsistency

Inseparability

Inventory

• Idle Production Capacity

The Four I’s of Services


FIGURE 10-1 FIGURE 10-1 Importance of services in the U.S. gross domestic product (GDP)


FIGURE 10-AFIGURE 10-A The 4 I’s of services


CLASSIFYING GOODS AND SERVICES

Convenience Goods

• Classifying Consumer Goods

Shopping Goods

Specialty Goods

Unsought Goods


FIGURE 10-2 FIGURE 10-2 Classification of consumer goods


Raymond Weil Watch What type of consumer good?


Production Goods

• Classifying Business Goods

Support Goods

• Installations

• Accessory Equipment

• Supplies

• Industrial Services

CLASSIFYING GOODSAND SERVICES

Derived Demand


• Classifying Services

CLASSIFYING GOODSAND SERVICES

Delivery by People or Equipment

Profit or Nonprofit Organizations

Government Sponsored


FIGURE 10-B FIGURE 10-B Service classifications


Concept Check

1. Explain the difference between product mix and product line.

A: The product mix is the number of product lines offered by a company. 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.


Concept Check

2. What are the four main types of consumer goods?

A: convenience, shopping, specialty, and unsought


Concept Check

3. What are three ways to classify services?

A: (1) delivered by people or equipment, (2) profit or nonprofit,and (3) government sponsored or not


NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

Functionally Different from Existing Products

• What is a New Product?

FTC: Newness = 6 Months or less After Regular Distribution

Company: Simply Anything Different


Sony’s PlayStation 3 and Microsoft’s Xbox How does the term “new” apply?

XboxPS3



• What is a New Product?

• Continuous Innovation

Newness from the Consumer’s Perspective

• Dynamically Continuous Innovation

• Discontinuous Innovation


FIGURE 10-3FIGURE 10-3 Product “newness,” as defined by the degree of consumer learning needed to use the product



• Why Products Succeed or Fail

• Insignificant Point of Difference

Marketing Reasons for New-Product Failures


FIGURE 10-DFIGURE 10-D What it takes to launch one commercially successful new product


General Mills FingosWhy did this product fail?





• Too Little Market Attractiveness

• Incomplete Market and Product Definition Before Product Development Starts

Protocol

• Poor Execution of the Marketing Mix: Name, Price, Promotion, and Distribution





• Bad Timing

• Poor Product Quality or Insensitivity to Customer Needs on Critical Factors

• No Economic Access to Buyers

A Look at Some Failures


Thirsty Dog! and Thirsty Cat!Why did these products fail?


FIGURE 10-4 FIGURE 10-4 Why did these new products fail?


Concept Check

1. From a consumer’s viewpoint, what kind of innovation would an improved electric toothbrush be?

A: continuous innovation


Concept Check

2. What does “insignificant point of difference” mean as a reason for new-product failure?

A: The product must have superior characteristics that deliver unique benefits to the user compared to those of competitors.


THE NEW-PRODUCT PROCESS

Objectives of the Stage: Identify Markets and Strategic Roles

3M: Cross-Functional Teams and Six Sigma

• New-Product Process

• Cross-Functional Teams

• New-Product Strategy Development

• Six Sigma


FIGURE 10-5 FIGURE 10-5 Stages in the new-product process


FIGURE 10-EFIGURE 10-E Strategic roles of most successful new products



Customer and Supplier Suggestions

• Idea Generation

Employee and Co-Worker Suggestions

Research and Development Breakthroughs

Competitive Products


Volvo’s YCCHow are new-product ideas generated?



Internal Approach

• Screening and Evaluation

• Concept Tests

External Approach


Frito-Lay Natural SnacksHow are new-product ideas screened & evaluated?


Concept Check

A: These are: (1) new-product strategy development; (2) idea generation;(3) screening and evaluation;(4) business analysis;(5) development; (6) market testing; and (7) commercialization.

1. What are the seven stages in the new-product process?


Concept Check

A: Customer and supplier suggestions, employee suggestions, R&D breakthroughs, and competitive products.

2. What are main sources of new-product ideas?



Prototype

• Business Analysis

Assessing the “Business Fit” of theNew Product

Big G plus Pillsbury: Finding Synergies,Segments, and Partners


Pillsbury What synergies, segments, or partners?



“Failure Analysis”

• Development

Safety Tests


Mattel’s BarbieWhy should laboratory and safety tests be done?



Test Marketing

• Market Testing

When Test Markets Don’t Work


FIGURE 10-6FIGURE 10-6 Six important U.S. test markets and the “demographics winner”:Wichita Falls, Texas, metropolitan statistical area



Burger King’s French Fries: The Complexities of Commercialization

• Commercialization

Speed as a Factor in New-Product Success

Winning Strategies in Commercializing Services

• Time to Market (TtM)

• Parallel Development

• Fast Prototyping

Regional Rollouts


FIGURE 10-7 FIGURE 10-7 Marketing information and methods used in the new-product process


Burger King French FriesWhy is commercialization risky?


Hewlett-Packard Cross-Functional TeamWhy is time to market (TtM) important?


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 physical, quality, and safety standards; externally, consumer tests are done.


Concept Check

2. What is a test market?

A: A test market is a city that is viewed as being representative of U.S. consumers in terms of demographics and brand purchase behaviors, is far enough from big markets to allow low-cost advertising, and has tracking systems to measure sales.


Concept Check

A: Commercialization involves positioning and launching a new product in full-scale production and sales and is the most expensive stage for most new products.

3. What is commercialization of a new product?


JALAPEÑO SODA, ANYONE?

GOING ONLINE


1. Access the NewProductWorks website. Study the “Hits and Misses” categories: “We Expect Them to be Successes,” “Jury is Out,” “Failures,” and “Favorite Failures.” Pick two of the failed products and identify the reasons that led to their failure.

Going Online


Going Online

2. Contrast these failed products with those that are deemed successes to learn why they became “sure-fire winners.”


3M™ GREPTILE GRIP ™

GOLF GLOVE:GREAT GRIPPING!

VIDEO CASE 10


VIDEO CASE 103M


1. What are the characteristics of the target market for the 3M Greptile Grip golf glove?

VIDEO CASE 103M


2. What are the key points of difference of the 3M Greptile Grip golf glove when compared to competitors’ products, such as FootJoy and Nike? Substitute products, such as golf grips?

VIDEO CASE 103M


3. How does the Greptile Grip golf glove meet 3M’s three criteria for new products?

VIDEO CASE 103M


4. Since 3M has no prior products for the golf market, what special promotion and distribution problems might 3M have?

VIDEO CASE 103M


5. How would you rate the 3M Greptile Grip golf glove on the following reasons for success and failure: (a) significant points of difference;(b) size and growth of the golf market;(c) product quality; (d) market timing;(e) execution of the marketing mix;(f) synergy or fit with 3M’s R&D, manufacturing and/or marketing capabilities; and (g) access to consumers?

VIDEO CASE 103M


WHY NEW-PRODUCT DEVELOPMENT CAN BE

A DICE ROLL:SOME FORECASTS

SUPPLEMENTALLECTURE NOTE 10-1


FIGURE 10-CFIGURE 10-C Why new-product development can be a dice roll: some forecasts


THE NEW-PRODUCT PROCESS AT 3M

SUPPLEMENTALLECTURE NOTE 10-2


3M New-Product IdeaUltrathon Insect Repellent


WHAT WERE THEY THINKING? ANALYZING

SOME NEW PRODUCT DISASTERS

IN-CLASS ACTIVITY 10-1



Problem Product A: Adam’s Body Smarts


Problem Product B: Coca Cola’s Surge


Problem Product C: Wheaties Dunk-A-Balls


Problem Product D: Garlic Cake


Problem Product E: Kellogg’s Special K Plus


Problem Product F: Dr. Care Toothpaste




HOW CAN 3M ENTERTHE PET CARE MARKET?

IN-CLASS ACTIVITY 10-2


3M Pet Care Product Lines: End of 2005


3M Pet Care Liquid Bandage: Early 2006






3M Pet Care Health Market Products: 2006


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.

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.

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


Consumer Goods

Consumer goods are products purchased by the ultimate consumer.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.

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.

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.

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.

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.

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CH10