MAR 3023 Chapter 10 Terms

Services can be classified according to whether they are delivered by

(1) people or equipment, (2) business firms or nonprofit organizations, or (3) government agencies

nondurable good

an item consumed in one or a few uses, such as food products and fuel

Components

items that become part of the final product. These include raw materials such as lumber, as well as assemblies such as a Ford car engine.

Unsought products

items that the consumer does not know about or knows about but does not initially want

Specialty products

items that the consumer makes a special effort to search out and buy

Convenience products

items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort

Support products

items used to assist in producing other products and services

The four types of consumer products differ in terms of

(1) the effort the consumer spends on the decision, (2) the attributes used in making the purchase decision, and (3) the frequency of purchase

Business analysis

specifies the features of the product or service and the marketing strategy needed to bring it to market and make financial projections. This is the last checkpoint before significant resources are invested to create a prototype—a full-scale operating model of the product or service

Organizational problems and attitudes can also cause new-product disasters. Two key ones are:

Encountering "groupthink" in task force and committee meetings and Avoiding the "NIH problem."

No economical access to buyers

Grocery products provide an example of this factor. Today's mega-supermarkets carry more than 60,000 different SKUs. With about 40,000 new consumer packaged goods (food, beverage, health and beauty aids, household, and pet items) introduced annually in the United States, the cost to gain access to retailer shelf space is huge. Because shelf space is judged in terms of sales per square foot, Thirsty Dog! (a zesty beef-flavored, vitamin-enriched, mineral-loaded, lightly carbonated bottled water for your dog) must displace an existing product on the supermarket shelves, a difficult task with the high sales-per-square-foot demands of these stores. Thirsty Dog! and its companion product Thirsty Cat! failed to generate enough sales to meet these requirements.

Such items include:

Installations, such as buildings and fixed equipment. Accessory equipment, such as tools and office equipment. Supplies, such as stationery, paper clips, and brooms. Industrial services, such as maintenance, repair, and legal services

Inventors

Many lone inventors and entrepreneurs develop brilliant new-product ideas—like Gary Schwartzberg's tube-shaped bagel filled with cream cheese. A portable breakfast for the on-the-go person, the innovative bagel couldn't get widespread distribution. So Schwartzberg sold his idea to Kraft Foods, Inc., which now markets its Bagel-fuls filled with Kraft's best-selling Philadelphia cream cheese across the United States

Universities

Many universities have technology transfer centers that often partner with business firms to commercialize faculty inventions. The first-of-its-kind carbonated yogurt Go-Gurt Fizzix was launched as a result of General Mills partnering with Brigham Young University to license the university's patent to put the "fizz" into the yogurt

Not satisfying customer needs on critical factors

Overlapping somewhat with point 1, this factor stresses that problems on one or two critical factors can kill the product, even though the general quality is high. For example, the Japanese, like the British, drive on the left side of the road. Until 1996, U.S. carmakers sent Japan few right-hand-drive cars—unlike German carmakers, which exported right-hand-drive models in several of their brands

Insignificant point of difference

Research shows that a distinctive point of difference is the single most important factor for a new product to defeat competing ones—having superior characteristics that deliver unique benefits to the user. Consider General Mills' launch of Fingos, a sweetened cereal flake about the size of a corn chip, with a $34 million promotional budget. Consumers were supposed to snack on them dry, but they didn't. The point of difference was not important enough to get consumers to stop eating competing snacks such as popcorn and potato chips

Smaller, nontraditional firms

Small technology firms and even small, nontraditional firms in adjacent industries provide creative advances. General Mills partnered with Weight Watchers to develop Progresso Light soups, the first consumer packaged product in any grocery category to carry the Weight Watchers endorsement with a 0 points value per serving.

Many firms look for outside visionaries that have inventions or innovative ideas that can become products. Some sources of this open innovation strategy include:

Smaller, nontraditional firms, Universities, Inventors

Poor execution of the marketing mix: brand name, package, price, promotion, distribution

Somewhere in the marketing mix there can be a showstopper that kills the product. Introduced by Gunderson & Rosario, Inc., Garlic Cake was supposed to be served as an hors d'oeuvre with sweet breads, spreads, and meats, but somehow the company forgot to tell this to potential consumers. Garlic Cake died because consumers were left to wonder just what a Garlic Cake is and when on earth a person would want to eat it

Too little market attractiveness

The ideal is a large target market with high growth and real buyer need. But often the target market is too small or competitive to warrant the huge expenses necessary to reach it. OUT! International's Hey! There's A Monster In My Room spray was designed to rid scary creatures from a kid's bedroom and had a bubble-gum fragrance. While a creative and cute product, the brand name probably kept the kids awake at night more than their fear of the monsters because it implied the monster was still hiding in the bedroom. Also, was this a real market?

Poor product quality

This factor often results when a product is not thoroughly tested. The costs to an organization for poor quality can be staggering and include the labor, materials, and other expenses to fix the problem—not to mention the lost sales, profits, and market share that usually result. In early 2007, with a $500 million promotional budget, Microsoft launched its Windows Vista to replace its successful predecessor Windows XP. But the Vista software had so many quality problems with compatibility and performance, even Microsoft's most loyal users revolted

product line extension

This is an incremental improvement of an existing product line the company already sells. For example, Purina added its "new" line of Elegant Medleys, a "restaurant-inspired food for cats," to its existing line of 50 varieties of its Fancy Feast gourmet cat food

Bad timing

This results when a product is introduced too soon, too late, or when consumer tastes are shifting dramatically. Bad timing gives new-product managers nightmares. Microsoft, for example, introduced its Zune player a few years after Apple launched its iPod and other competitors offered their new MP3 players. Microsoft discontinued Zune after failing to capture significant market share from the Apple iPod

Incomplete market and product protocol before product development starts

Without this protocol, firms try to design a vague product for a phantom market. Developed by Kimberly-Clark, Avert Virucidal tissues contained vitamin C derivatives scientifically designed to kill cold and flu germs when users sneezed, coughed, or blew their noses into them. The product failed in test marketing. People didn't believe the claims and were frightened by the "cidal" in the brand name, which they connected to words like suicidal. A big part of Avert's failure was its lack of a product protocol that clearly defined how it would satisfy consumer wants and needs

standard test market

a company develops a product and then attempts to sell it through normal distribution channels in a number of test-market cities. Test-market cities must be demographically representative of markets targeted for the new product, have cable TV systems that can deliver different ads to different homes, and have retailers with checkout counter scanners to measure sales. A distinguishing feature of a standard test market is that the producer sells the product to distributors, wholesalers, and retailers, just as it would do for other products

Another source of new products

a firm's own research and development laboratories. Apple's sleek, cutting-edge designs for the iPad, iPhone, iMac, and Apple Watch came out of its Apple Industrial Design Group, guided by Senior Vice President of Design Jonathan Ive. What is the secret to Apple's world-class ability to convert vague concepts into tangible products? An action-item list from every meeting that focuses on who does what by when!

product

a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers' needs and is received in exchange for money or something else of value.

product line

a group of product or service items 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. Nike's product lines include shoes and clothing, whereas the Mayo Clinic's service lines consist of inpatient hospital care and outpatient physician services. Each product line has its own marketing strategy

slotting fee

a payment a manufacturer makes to place a new item on a retailer's shelf

failure fee

a penalty payment a manufacturer makes to compensate a retailer for devoting valuable shelf space to a product that failed to sell

product item

a specific product that has a unique brand, size, or price. For example, Ultra Downy softener for clothes comes in different forms (liquid for the washer and sheets for the dryer) and load sizes (40, 60, etc.)

Market testing

a stage of the new-product development process that involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy

protocol

a statement that, before product development begins, identifies (1) a well-defined target market; (2) specific customers' needs, wants, and preferences; and (3) what the product will be and do to satisfy consumers

simulated (or laboratory) test markets (STMs)

a technique that somewhat replicates a full-scale test market. STMs are often run in shopping malls, to find consumers who use the product class being tested. Next, qualified participants are shown the product or the product concept and are asked about usage, reasons for purchase, and important product attributes. They then see the company's and competitors' ads for the test product. Finally, participants are given money and allowed to choose between buying the firm's product or the products of competitors from a real or simulated store environment

idea

a thought that leads to a product or action, such as a concept for a new invention or getting people out to vote

stock keeping unit (SKU)

a unique identification number that defines an item for ordering or inventory purposes.

Crowdfunding

a way to gather an online community of supporters to financially rally around a specific project that is unlikely to get resources from traditional sources such as banks or venture capital firms. For example, Kickstarter.com raised $1.2 million for start-up SmartThings to introduce a product that allows users to monitor their homes by remote control.

product mix

consists of all of the product lines offered by an organization. For example, Cray Inc. has a small product mix of three product lines (supercomputers, storage systems, and a "data appliance") that are sold mostly to governments and large businesses.

continuous innovation

consumers don't need to learn new behaviors. Toothpaste manufacturers can add new attributes or features like "whitens teeth" or "removes plaque" when they introduce a new or improved product, such as Colgate Total Advanced Gum Defense toothpaste. But the extra features in the new toothpaste do not require buyers to learn new tooth-brushing behaviors, so it is a continuous innovation.Page 270 The benefit of this simple innovation is that effective marketing mainly depends on generating awareness, not re-educating customers

parallel development

cross-functional team members who conduct the simultaneous development of both the product and the production process stay with the product from conception to production. This approach enabled Hewlett-Packard to reduce the development time for notebook computers from 12 to 7 months

good

has tangible attributes that a consumer's five senses can perceive. For example, the Apple Watch can be touched and its features can be seen and heard. A good also may have intangible attributes consisting of its delivery or warranties and embody more abstract concepts, such as becoming healthier or wealthier. Goods also can be divided into nondurable goods and durable goods

Services

intangible activities or benefits that an organization provides to satisfy consumers' needs in exchange for money or something else of value. Services have become a significant part of the U.S. economy, and often augment products. For example, a product is Apple's iPhone 6 and iPhone 6 Plus, and Verizon is a wireless network

regional rollouts

introduce a product sequentially into geographical areas of the United States to allow production levels and marketing activities to build up gradually, to minimize the risk of new-product failure. Grocery product manufacturers and telephone service providers use this strategy

controlled test market

involves contracting the entire test program to an outside service. The service pays retailers for shelf space and can therefore guarantee a specified percentage of the test product's potential distribution volume. IRI is a leader in supplying controlled test markets to consumer packaged good firms like General Mills.

Crowdsourcing

involves generating insights leading to actions based on ideas from massive numbers of people. This open innvotation practice requires a precise question to focus the idea-generation process. Dell used crowdsourcing to develop an online site to generate 13,464 ideas for new products as well as website and marketing improvements, of which 402 were implemented

discontinuous innovation

involves making the consumer learn entirely new consumption patterns to use the product. Have you bought a wireless router for your computer? Congratulations if you installed it yourself! Recently, one-third of those bought at Best Buy were returned because they were too complicated to set up—the problem with a discontinuous innovation. Marketing efforts for discontinuous innovations usually involve not only gaining initial consumer awareness but also educating consumers on both the benefits and proper use of the innovative product, activities that can cost millions of dollars—and maybe require Geek Squad help

test marketing

involves offering a product for sale on a limited basis in a defined area for a specific time period. The three main kinds of test markets are (1) standard, (2) controlled, and (3) simulated. Because standard test markets are so time-consuming and expensive and can alert competitors to a firm's plans, some firms skip test markets entirely or use controlled or simulated test markets

Shopping products

items for which the consumer compares several alternatives on criteria such as price, quality, or style

time to market (TtM)

often vital in introducing a new product. Recent studies have shown that high-tech products coming to market on time are far more profitable than those arriving late

durable good

one that usually lasts over many uses, such as appliances, cars, and smartphones

dynamically continuous innovation

only minor changes in behavior are required. Procter & Gamble's Swiffer WetJet all-in-one mopping solution is a successful dynamically continuous innovation. Its novel design eliminates mess, elbow grease, and heavy lifting of floor cleaning materials without requiring any substantial behavioral change. So the marketing strategy here is to educate prospective buyers on the product's benefits, advantages, and proper use. Procter & Gamble did this with Swiffer. The result? A billion dollars in annual sales

business products (also called B2B products or industrial products)

products organizations buy that assist in providing other products for resale

Consumer products

products purchased by the ultimate consumer

derived demand

sales of business products frequently result (or are derived) from the sale of consumer products. For example, as consumer demand for Ford cars (a consumer product) increases, the company may increase its demand for paint spraying equipment (a business product)

customer experience management (CEM)

the process of managing the entire customer experience within the company. Marketers must consider employees' interactions with customers so that the new services are consistently delivered and experienced, clearly differentiated from other service offerings, and relevant and valuable to the target market

Idea generation

the second stage of the new-product development process, involves developing a pool of concepts to serve as candidates for new products, building upon the previous stage's results. Many forward-looking organizations have discovered that they are not generating enough useful new-product ideas. One internal approach for getting ideas within the firm is to train employees in the art and science of asking specific, probing questions. The goal in generating new-product ideas and strategies is to move from "what is" questions that describe the present situation to "what if" questions that focus on solutions and marketing actions.

new-product development process

the seven stages an organization goes through to identify opportunities and convert them into salable products or services

new-product strategy development

the stage of the new-product development process that defines the role for a new product in terms of the firm's overall objectives. The outcome not only defines the vital "protocol" for each new-product idea but also identifies the strategic role it might serve in the firm's business portfolio.

Screening and evaluation

the stage of the new-product development process that internally and externally evaluates new-product ideas to eliminate those that warrant no further effort

commercialization

the stage of the new-product development process that positions and launches a new product in full-scale production and sales. This is the most expensive stage for most new products

Development

the stage of the new-product development process that turns the idea on paper into a prototype. This results in a demonstrable, producible product that involves not only manufacturing the product efficiently but also performing laboratory and consumer tests to ensure the product meets the standards established for it in the protocol

fast prototyping

uses a "do it, try it, fix it" approach—encouraging continuing improvement even after the initial design. To speed up time to market, many firms insulate their new-product teams from routine administrative tasks to keep them from bogging down in red tape