Water JoeWhat caused David to come up

with a new product idea?What did he have to do to turn

his idea into a real product?What problems did he run into?Have you ever heard of Water

Joe?

Developing New ProductsPrinciples of Marketing

What is a “New” Product?Simple variation on an existing

product is often considered a new product

Repackaging is a very common way of developing a “new” product

Examples:◦The Milk Chug◦New design of the taillights◦New flavor of potato chip

“Really” New ProductsRuffles potato chips (ridges)PT Cruiser and HummerThe first Apple home computersSony Walkman—first personal portable

music deviceFirst cell phones—wireless telephoneFirst hybrid gas/electric carsNew products are risky, companies

prefer to develop variations on current successful products

Risks of New ProductsOver 25,000 new consumer

products hit the market yearlyOver 75 percent of these failLarge companies spend $20

million or more to develop, product, advertise, and introduce a new product

Well-known failures: Ford Edsel, New Coke, and McDonald’s Arch Deluxe

ResearchChoose a new product on the

market or make up a new product.

What are the risks that the manufacturer has taken on with this product?

Eight Steps to New-Product IdeasIdea GenerationIdea ScreeningBusiness

AnalysisProduct DesignProductionTest MarketingIntroductionEvaluation

Larger companies have product development departments

This department works closely with the marketing department

Idea GenerationObservation

◦Marketers look for unfulfilled customer needs

◦Customers often present ideas for new products to the company

◦Salespeople often have new-product ideas because they interact with customers

◦Marketers watch the competition, sometimes buy their new product, and then decide to make a similar but better product

◦Observations of companies in other industries

ActivityGroup Task: Develop a new pen

or other office product, as you learn about new-product development in this chapter

Form groups of three or lessMake a list of what you might

need to know to develop a new product

Share your ideas

Idea Generation, con’t.Research

◦Analyze products that are returned often; could lead to a new product idea

◦Survey your customers about their needs and possible new products

◦Trend research: discover new-product ideas by the trends of society

Idea Generation, con’t.Creative Thinking

◦Creativity: the ability to produce something new; often considered a talent

◦Examples: Auntie Anne's sells pretzels only

◦Can be developed Brainstorming Learning Questioning Journaling Participating in New Activities Taking a Different Point of View

New-Pen ActivityDo some research by visiting the Web sites

of office suppliers such as Office Depot, Office Max, Bic Stationery Products, and Papermate

Compile lists of new pens and office products

What are the new features?Generate ideas for your new product using

the techniques for creativity that you just learned

Write your ideas under each technique heading

Next Two StepsIdea Screening:

◦Will customers want and buy the product?

Business Analysis: ◦Can our company produce and sell the

product profitably?◦Products must be appropriate to the

company’s image, goals, strengths, and resources.

◦New products should provide a competitive advantage

Business AnalysisNew product should:

◦Be appropriate to the company’s image, goals, strengths, and resources Jaguar’s image: luxury sports sedans

◦Fit into the goals of the company◦Have a feature that is more satisfying

than the competitors’ feature◦Fit with the strengths of the company

Jaguar wanted a less expensive vehicle; developed the X-Type

◦Affordable to produce and market

Product DesignThe details of how to produce the

product are plannedGoods, services, and ideas

should go through a design phaseNew product is tried out on a few

potential customersBrand is developed

◦Name and identity, logo, slogan, packaging

New-Office Product ActivityDecide which product idea to pursueWrite a new-product description

◦Include target market◦Explain their interest

Conduct a business analysis◦Determine the materials (make a list)◦Include the costs of the materials◦Make a prototype??◦Use the information to determine the cost

of producing just one pen/office supply

New-Product ActivityGather information on pricing of similar

products◦Record information about your competition

Brand names Descriptions Prices

What should you price your product?Compare price to cost—can you make a

profit?Revise your product, if necessary to come

up with something that will be profitable

New Product ActivityReview all the information on your

productAnswer these questions:

◦Does my group have the resources needed to make the new product?

◦Does my group have a competitive advantage over the other groups?

◦Does the new product fit the goals and personality of my group?

◦Share your business analysis.

Goods—Product DesignPrototype-working model of the

actual product◦Experiment with the prototype will

determine performance successMarketers use the prototype to

get customers’ responses

New-Pen ActivityDesign your new product

◦Make a drawing or computer creation◦Brand name◦Logo◦Packaging

Plan how to produce your products in large enough quantities to sell

Make a prototype of your productCreate a questionnaire to gather

feedback from customers who test the product

Services and Ideas—Product DesignService providers go through a

period of training to learn to perform the service

Plan to provide the service◦Physical location, equipment, organizing

the system for delivering, and decorations

◦Trial run: consists of trying out the service on a few selected customers to make sure that everything runs smoothly

ProductionManufacture the product in large

quantitiesThe number to produce is a

complex decision with a major impact on the profitability

For services and ideas, production is inseparable from the product itself

Test MarketingInvolves introducing a new product to

a small portion of the target marketCan test the entire marketing mix—

product, place, price, and promotionCan test only one element of the

marketing mixRisky because competitors can see

your product and copy itSmall companies may not be able to

afford test marketing

IntroductionProduct actually enters the

marketOften called CommercializationPromotion is critical at this point

◦Often starts before the product is ready

◦Release date is the date the product is first available to the market

New products are often released at trade shows (large gathering to display products for sale)

EvaluationShould we continue to produce

the product?Should we make any changes to

the product?Should we expand the market?