MAR 3023 - Chapter 10: Developing New Products and Services

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

(1) smaller, nontraditional firms, (2) universities, and (3) inventors

What are the three main kinds of test markets?

(1) standard, (2) controlled, and (3) stimulated

What are the attributes of consumer products?

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

Marketing Reasons for New-Product Failures

1. insignificant point of difference 2. incomplete market and product protocol before product development starts 3. not satisfying customer needs on critical factors 4. bad timing 5. no economical access to buyers 6. poor execution of the marketing mix: brand name, package, price, promotion, distribution 7. too little market attractiveness 8. poor product quality

Classifying Services

1. people or equipment 2. business firms or nonprofit organizations 3. government agencies

Two key product disasters are:

1.) encountering "groupthink" in task force and committee meetings 2.) avoiding the "NIH" problem

Successful organizations view newness and innovation in their products at three levels:

1.) lowest level - which usually involves least risk, is a product line extension; incremental improvement of an existing product line in the company already sells this has the potential benefit of adding new customers but the twin dangers of increasing expenses and cannibalizing products in its existing lines (ex.) Purina added its "new" line of Elegant Medleys, a "restaurant-inspired food for cats" to its existing lines of 50 varieties of its Fancy Feast gourmet cat food 2.) next level - significant jump in innovation or technology or brand extension involving putting an established brand name on a new product in an unfamiliar market (ex.) the significant jump in technology might be when a manufacturer offers new smartphones or digital cameras; secondly, using an existing brand name to introduce a new product into an unfamiliar market - Colgate putting brand name on a line of frozen dinners 3.) third and highest level of innovation - involves a radical invention, a truly revolutionary new product (ex.) the new 3D printer (example of radical invention)

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; a distinguishing feature of a standard test is that the producer sells the product to distributors, wholesales, and retailers, just as it would do for other products

Internal Approach

a firm's employees evaluate the technical feasibility of a proposed new-product idea to determine whether it meets the objectives defined in the new-product strategy development stage

What is another source of new products?

a firm's own research and development laboratories

Protoype

a full-scale operating model of the product or service

Business Products (characteristics)

a major characteristic of business products are often the result of derived demand; that is, sales of business products frequently result (or are derived) from the sale of consumer products (ex.) derived demand - as consumer demand for Ford cars (a consumer product) increases, the company may increase its demand for paint spraying equipment (a business product)

Slotting-Fee

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

Product 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

Stimulated Test Markets

a technique that somewhat replicates a full-scale test market; STM's 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 competitor's 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 stimulated store environment

Product Line Extension

adding additional products to an existing product line in order to compete more broadly in the industry

The business analysis process requires not only detailed financial projections but:

also assessments of the marketing product synergies related to the company's existing operations

Services

are intangible activities or benefits that an organization provides to satisfy consumers' needs in exchange for money or something else of value (ex.) Apple's iPhone and Verizon is a wireless netowkr service provider

Shopping Products

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

Components

are items that become part of the final product (ex.) these include raw materials such as grain or lumber, as well as assemblies or parts, such as a Ford car engine or car door hinges

Unsought Products

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

Speciality Products

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

Convenience Products

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

Support Products

are items used to assist in producing other products and services (ex.) (1) installations - such as buildings and fixed equipment, (2) accessory equipment - such as tools and office equipment, (3) supplies - such as stationary, paper clips, and brooms, (4) industrial services - such as maintenance, repair, and legal services

Business Products

are products organizations buy that assist in providing other products for resale; (also called B2B products or industrial products) (ex.) Apple salesperson will contact a firm for directly and offer discounts for large volume purchases

Consumer Products

are purchased by the ultimate consumer (ex.) iMAC being sold in a retailer store

The essence of marketing is in developing products and services to meet:

buyer's needs

Speed as a Factor in New-Product Success

companies have discovered the speed or time to market (TtM) if often vital in introducing a new product

Business products may be classified as _________________ or ___________________

components or support products

Open Innovation

consists of practices and processes that encourage the use of external as well as internal ideas as well as internal and external collaboration when conceiving, producing, and marketing new products and services

What are the two broad categories of products widely used in marketing?

consumer products and business products

Continuous Innovation

consumers don't need to learn new behaviors (ex.) new and improved shaver, detergent, and toothpaste

Feature Fatigue

consumers get worn down when there are too many features on a product; buyer's remorse when we don't use all the features and feel like we wasted money on them; paradox though because it is often those features that drive our purchase decisions

A second way to define new products is in terms of their effects on:

consumption

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

What is another creative idea generation method if an R&D marketing team wants ideas from 10,000 to 20,000 customers or suppliers

crowdsourcing

Firms ask their salespeople to talk to:

customers and ask their purchasing personnel to talk to suppliers in the new-product development process

Concept Tests

external evaluations with consumers that consist of preliminary testing of a new-product idea rather than an actual product

If a new grocery product does not achieve a predetermined sales target, some retailers require a:

failure fee

External Approach

firms use concept tests

Durable Goods

goods that last for a relatively long time, such as appliances, refrigerators, cars, and DVD players, smartphones, etc.

Good

has tangible attributes that a consumer's five senses can perceive (ex.) Apple watch can be touched and its features can be seen and heard a good also has intangible attributes consisting of its delivery or warranties and embody more abstract concepts, such as becoming healthier or wealthier

Regular Distribution

individuals are uniformly spaced

Regional Rollouts

introduce a product sequentially into geographical areas of the US to allow production levels and marketing activities to build up gradually, to minimize the risk of new product failure many grocery product manufacturers and telephone service providers use this strategy

Controlled Test Market

involves contracting the entire test program to an outside service

Crowdsourcing

involves generating insights leading to actions based on ideas from massive numbers of people

Discontinuous Innovation

involves making the consumer learn entirely new consumption patterns to use the product (ex.) wireless router, digital video recorder, and electric car

Test Marketing

involves offering a product for sale on a limited basis in a defined area for a specific time period

Product

is 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

is 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 (ex.) Nike's product lines include shoes and clothing, whereas the Mayo Clinic's service lines consist of inpatient hospital care and outpatient physician services

Product Item

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

Stage 6: Market Testing

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

Idea

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

Crowdfunding

is 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 (ex.) Kickstarter

Nondurable Goods

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

Customer Experience Management (CEM)

is the process of managing the entire customer experience within the company

Stage 3: Screening and Evaluation

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

Stage 5: Development

is the stage of the new-product 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

Both _________________ and _________________ factors contribute to new-product failures

marketing and nonmarketing

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 scanners to measure sales

Marketers must consider employees' interactions with customers so that:

new services are consistently delivered and experiences, clearly differentiated from other service offerings, and relevant and valuable to the target market

Organizational problems and attitudes can also cause:

new-product disasters

Analyzing the competition can lead to:

new-product ideas

Goods can also be divided into ______________________ and _____________________ goods

nondurable and durable

When Test Markets Don't Work

not all products use test markets; test marketing is a service is very difficult because consumers can't see what they are buying

Dynamically Continuous

only minor changes in behavior are required (ex.) electric toothbrush, LED HDTVs, and smartphones

Failure Fee

penalty payment by the manufacturer to compensate them for sales that its valuable shelf space was unable to generate

Product Form

pertains to variations of a product within the product class

A product generally includes not only:

physical goods but ideas and services as well

What does a new product or service require?

product protocol

Feature Bloat

proliferation of extra features (unnecessary features)

Product Class

refers to the entire product category or industry

New grocery products pose special commercialization problems. Because shelf-space is so limited, many supermarkets require a:

slotting fee for new products

Stage 4: 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

Businesses often seek new product ideas from employees through:

suggestion boxes in the workplace

Organizations that develop service-dominated offerings need to ensure:

that employees have commitment and skills to meet customer expectations and sustain customer loyalty - an important criterion in screening a new-service idea

Newness In Legal Terms

the U.S. Federal Trade Commission (FTC) advises that the term new be limited to use with a product up to six months after it enters regular distribution

Stage 2: Idea Generation

the second stage of the new-product process, involves developing a pool of concepts to serve as candidates for new products, building upon the previous stage's results; one internal approach to getting ideas within the firm is to train employees in the art and science of asking specific, probing questions

New-Product Development Process

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

Stage 7: 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 new products

Stage 1: New-Product Strategy Development

the stage of the new-product process that defines the role for a new product in terms of the firm's overall objectives; during this stage the firm uses both SWOT analysis and environmental scanning to assess its strengths and weaknesses relative to the trends it identifies as opportunities or threats occasionally a firm's Stage 1 activities can be blindsided by a revolutionary new product or technology that completely disrupts its business, sometimes called a "disruptive innovation" (ex.) (1) wikipedia and (2) digital photography

The business analysis stage assesses:

the total "business fit" of the proposed new product within the company 's mission and objectives - from whether the product or service can be economically produced to the marketing strategy needed to have it succeed in the marketplace

What happens every year with products?

thousands of products fail every year

Fast Prototyping

uses a "do it, try it, fix it" approach, encouraging continuing improvement even after the initial design

Time to Market (Ttm)

vital in introducing a new product

Product Mix

which consists of all of the product lines offered by an organization (ex.) 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 (ex.) Proctor & Gamble, however, has a large product mix includes product lines such as beauty and grooming (Crest toothpaste and Gillette razors) and household care (Downy fabric softener, Tide detergent, and Pampers diapers)

Stock Keeping Unit (SKU)

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