Ch. 23, Developing New Products

Developing New Products Part 4 Product Dynamics Chapter 23 Developing New Products

Chapter Objectives Explain why marketers use a product development process. Summarize the eight steps in the new-product development process.

Marketing Terms creativity competitive advantage prototype trial run test marketing

What makes a product “new”?

What Is a “New” Product? In one sense, there is nothing new under the sun Practically speaking, a new product is one that differs in some way from existing products Many new-product developers take an existing product and change one or two things in it (Continued)

Describe some new products. What Is a “New” Product? Ways to make existing products new repackage make minor variations give the product a new design use new technology Describe some new products.

Risk of New Products Developing and selling a new product is risky Over 75% of new products fail Famous new-product failures Ford Edsel, New Coke, and McDonald’s Arch Deluxe To reduce the risk of failure many businesses use an eight-step process

New-Product Process Idea generation Idea screening Business analysis Product design Production Test marketing Introduction Evaluation

How would you develop ideas for new products? Idea Generation Goal: to create a large list of ideas from which to choose Product ideas usually result from observation research creative thinking How would you develop ideas for new products?

Idea Generation: Observation Observe customers, friends, and colleagues to find unfilled customer needs Observe and listen to customers Observe your competition

Idea Generation: Research Conduct research by analyzing your business records surveying your customers reading articles on trends and new-product development keeping up with technology and inventions Hire a marketing research firm that specializes in trend research

Idea Generation: Creative Thinking Creativity ability to produce something new Creativity is a talent Creativity is also a set of skills that can be learned or developed (Continued)

Idea Generation: Creative Thinking Techniques used to develop creativity brainstorming learning questioning journaling participating in new activities taking a different point-of-view What could you do to improve your creativity?

Idea Screening Goal: to choose the best idea with the most potential for profits Review all ideas For each one, ask Will our customers buy it? Can our company produce and sell it profitably? (Continued)

Idea Screening Do more marketing research Try out product ideas on a sample of potential customers

Business Analysis Goal: to make sure the new-product idea can be done by the company A new product should be appropriate to the company’s image goals strengths resources (Continued)

Business Analysis Consider your company’s image Does the new product fit in with the other products? Consider your company’s goals Does the new product fit our goals? Does the new product provide a competitive advantage? some feature that makes our product more desirable than competing products (Continued)

Business Analysis Consider your company’s strengths Do we have the expertise to create the new product? If we don’t have the expertise, can we buy the expertise? Consider your company’s resources Can we afford to produce and market the new product?

Product Design Goal: convert the product idea into reality Goods and services go through slightly different product design processes

Product Design: Goods For tangible goods, the first step is usually to develop a prototype a working model of the actual product Designers experiment with the prototype to see if it performs as expected Marketers try the prototype on potential customers to see if they like and will buy the new product (Continued)

Product Design: Goods For a good, the brand name, logo, slogan, and packaging may be developed at this time Photo by Steve Olewinski

Product Design: Services and Ideas Product design for a service planning what will be included in the service training the service providers creating the space where the service will be provided including equipping and decorating the space setting up the system for delivery and payment (Continued)

Product Design: Services and Ideas For a service, the equivalent of the prototype is the trial run like a dress rehearsal for a play

Production Goal: to make products in large enough quantities to sell For goods, the production step consists of deciding how many to make manufacturing the good in large quantities (Continued)

Production Problems can occur during production difficulties getting raw materials machines break down final goods do not work as expected These problems must be solved (Continued)

Production During the production step the rest of the marketing mix—place, price, and promotion—is finalized For services and ideas, production is inseparable from the product itself so, the production step is part of product introduction

Test Marketing Goal: to see if the market will buy the product What if the market does not like and buy the product? To try to avoid this risk, companies use test marketing introducing the new product to a small portion of the target market (Continued)

Test Marketing Test marketing tests a single variable or all variables of the marketing mix is usually too expensive for smaller companies has risks your competitors might see your product and copy it

Introduction Goal: to make a big splash and get customers to buy the product Introduction when the product is first presented to the market also called commercialization Promotion is critical and often starts before the product is actually available (Continued)

New products are often introduced at trade shows Courtesy of National Restaurant Association New products are often introduced at trade shows

Evaluation Goal: to decide what to do next After product starts selling, ask Should we continue to produce this product? Should we make any changes to it? Should we change any part of the marketing mix, such as promotion, distribution, or price? Should we expand the market?

Review Describe the eight-step process used to develop new products. From where do product ideas come? Describe techniques used to develop creativity. How can marketers test market a product?

Glossary Back competitive advantage. Aspect of a product that is better than the competitors’ products. creativity. Ability to produce something new. prototype. Working model of the actual product. (Continued)

Glossary Back test marketing. Introducing a new product to a small portion of the target market, for example one city. trial run. Trying out a service on a few selected customers to make sure that everything runs smoothly.