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DEVELOPING NEW PRODUCTS

AND SERVICES1010CHAPTER

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• 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 CHAPTERYOU SHOULD BE ABLE TO:

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• 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 CHAPTERYOU SHOULD BE ABLE TO:

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3M: CONTINUOUS INNOVATION

+ GENUINE BENEFITS

= SATISFIED CUSTOMERS

DEVELOPING NEW PRODUCTS AND SERVICES

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• Product Line and Product Mix

• Classifying Products• Type of User

Consumer goods Business goods

• Degree of Tangibility

• Services and New-Product Development

THE VARIATIONS OF PRODUCTS

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• Classification of Consumer Goods Convenience goods Shopping goods Specialty goods Unsought goods

CLASSIFYING CONSUMERAND BUSINESS GOODS

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• Classification of Business Goods Production Goods Support Goods Installations Accessory Equipment Supplies Services

CLASSIFYING CONSUMERAND BUSINESS GOODS

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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.

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Concept Check

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

A: Convenience, shopping, specialty, and unsought goods

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Concept Check

3. To which type of good (business or consumer) does the term derived demand generally apply?

A: Business good

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• 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

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• Marketing Reasons for Failures Insignificant “point of difference” Incomplete market and product definition

(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

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• A Look at Some Failures Kimberly Clark’s Avert

Virucidal Tissues Out International’s Hey!

NEW PRODUCTS AND WHY THEY SUCCEED AND FAIL

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Concept Check

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

A: Continuous innovation

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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.

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• New-Product Strategy Development• Objectives of the Stage: Identify Markets

and Strategic Roles

• 3M: Cross-Functional Teams, Six Sigma, and Lead Users

THE NEW-PRODUCT PROCESS

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• Idea Generation• Customer and Supplier Suggestions

• Employee and Co-Worker Suggestions

• Research and Development Breakthroughs

• Competitive Products

THE NEW-PRODUCT PROCESS

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• Screening and Evaluation• Internal Approach

• External Approach

THE NEW-PRODUCT PROCESS

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Concept Check

1. What step in the new-product process has been added in recent years?

A: New product strategy development.

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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

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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.

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• Business Analysis

• Development

• Market Testing• Test Marketing

THE NEW-PRODUCT PROCESS

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• Market Testing (cont)• Simulated Test Markets

• When Test Markets Don’t Work

THE NEW-PRODUCT PROCESS

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• Commercialization• Burger King’s French Fries: The

Complexities of Commercialization

• The Risks and Uncertainties of the Commercialization Stage Slotting fee Failure fee

• Speed as a Factor in New-Product Process

THE NEW-PRODUCT PROCESS

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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.

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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.

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Concept Check

3. What is the commercialization of a new product?

A: Positioning and launching the product in full-scale production and sales.