Chapter 5

Product Development

Marketing Research reveals what the consumer wants and/or needs and points the way toward business opportunities.

Before a new product/service is developed two questions must be asked: “Can we produce it?” and “Can we sell it?”

The marketing department, through consumer research, will decide whether or not the product can be sold then it is up to the Production Department.

Production Department

decides if the product can be produced (does the company have the facilities)

outlines the costs of making the new product (helps the marketing dept. to come up with a price)

If a company does not have it’s own production department, then they can hire one.

Section 5.2..Innovation or Invention Innovation ~ a

product or service that uses new technology, items or processes to change existing products.

Innovation Video Popular Mechanics

Invention ~ new devices, methods, or processes developed from study and experimentation. Businesses use inventions to create original solutions to meet consumer needs.

Best Inventions Of 2006 2007 Popular Science

Can You…

List 5 inventions and 5 corresponding innovations:

Inventions: Innovations:

Why is it so hard to list modern day inventions, yet so easy to list modern day innovations?

The answer may be that:“Everything has been done.” But has it?With the rapid rate of change in the

Information Age, there is no point in “reinventing the wheel” when you can just “replace the tire.”

The basic inventions were created a long time ago for us, now we just need to keep improving them.

Section 5.3 ~ The Stages of Product Development

Idea Generation Idea Screening ~ test new ideas with consumers and

see if anyone else is already making this product/service Concept Development ~ design a prototype (sample),

see if it will work and market test it. (Testing Consumer Products)

Market Strategy ~ find out how to reach your target market

Feasibility Study ~ a study to determine how well a potential product or service would work (Designing Toys) The product must be one that the company can make and sell, that consumers want and at a price they will pay, and that will produce a profit for the company.

Product Design ~ takes into consideration the preferences of the primary market

Test Marketing Market Entry ~ product enters the product life cycle

Section 5.4

Product Development and Utility

Product development can add utility to a product. (Utility – what is added to a product to make it valuable on the market.)

Types of Utility; 1. Form 2. Information 3. Place 4. Time 5. Possession

Form Utility – relationship between a product or service’s form and its function. Form refers to the products “look” or the type of service.

Video

Types of Form Utility:

Material- e.g. Columbia and other companies are always coming up with new materials

Scent Flavour Color – many consumers are influenced by color (Coffee

Cans Design – most important part of form utility. (Ergonomic

designs; comfortable, easy to use etc. Aesthetics is also important, people will pay a lot for attractive cars, furniture etc.)

Packaging – an innovative package can create a whole industry

Videohttp://www.youtube.com/watch?v=-0EvsecMxbc&feature=related

Utility Continued Information Utility –providing knowledge, facts,

instructions, and technical support for a product that adds value to the product. E.g. 24 hr. help line

Place Utility – making the product accessible for the consumer adds value to the product. E.g. available over the internet & in many stores

Time Utility – providing the product in the marketplace when the consumer needs it adds value to the product. E.g. open 24 hours (Homer Video)

Possession Utility – making a product easy to purchase adds value to the product. E.g. provide credit

Section 5.5

Product Development &

the Marketing Concept

Product Development &the Marketing Concept

To properly study the consumer’s & competition’s place in product development process, a business might use one or all of the following analytical tools:

Product Mapping

classifying/grouping products together based on various criteria to create competitive segments and using those segments to create a market for a specific product.

Can demonstrate individual product attributes that consumers like or dislike.

Market Opportunity Analysis analysis of where in the market a product

could fit. MOA is composed of three distinct parts:Overall Market –looking at the category your

product/service fits into and analyzing every product/service in that category.

Indirect Competition – grouping competitive brands by features. (Frozen desserts – cakes, cookies, pies, ice cream, pudding etc.)

Direct Competition – identifying all competitive brands that compete for a share of the same market.

Market Potential Analysis

MOA can help determine market potential. (A figure calculated to find out how many people might buy the product being marketed.MP = N x P x QN = number of possible buyers; P = selling price; Q = the average number of the item that each

buyer purchases in a year.

Benefit Analysis

any feature of a product/service should add utility and provide benefit to the consumer. (Two types)Feature-Benefit Analysis – looking at each

feature and finding the utility and benefit it adds to the product.

Cost-Benefit Analysis – comparison of the estimated costs of an action with the estimated benefits it is likely or intended to produce. (Is it worth changing or producing.)