Powerpoints prepared by: Victor Bilodeau Grant MacEwan University - School of Business © 2011 McGraw-Hill Ryerson Ltd. All rights reserved. Marketing 8th Canadian Edition

Developing New Products and Services 10 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

1. Recognize the various terms that pertain to products and services. 2. Identify the ways in which consumer and business goods and services can be classified. 3. Explain the implications of alternative ways of viewing “newness” in new products and services. 4. Describe the factors contributing to a product’s or service’s failure. 5. Explain the purposes of each step of the new-product process. Learning Objectives After reading this chapter and engaging with this lecture, you should be able to: © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

Apple’s New-Product Innovation Machine ‣ Steve Jobs, co-founder and CEO of Apple, Inc. ‣ Apple Inc. is rated by Business Week as one of the most innovative companies on the globe. ‣ Innovative products such as the MacBook Air, iTunes, iPhone, iPod nano, iPod Touch and the iPad. ‣ Within just 80 days of its release, Apple sold over 80 million iPad units. ‣ The iPad will run almost all of the more than 225,000 apps on the App Store, including apps already purchased for your iPhone. © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Product Item, Product Line and Product MixProduct LineProduct Mix ‣ Classifying Products ‣ Type of User ‣ Consumer goods Consumer goods ‣ Business goods Business goods ‣ Degree of Tangibility ‣ Non-durable good ‣ Durable good ‣ Service ‣ Experience THE VARIATIONS OF PRODUCTS LO 1 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

CLASSIFYING CONSUMER AND BUSINESS GOODS ‣ Classification of Consumer Goods ‣ Convenience goods Convenience goods ‣ Shopping goods Shopping goods ‣ Specialty goods Specialty goods ‣ Unsought goods Unsought goods ‣ What would be an example of an unsought good LO 2 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

FIGURE 10-1 Classification of consumer goods LO 2 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

CLASSIFYING CONSUMER AND BUSINESS GOODS ‣ Classification of Business Goods ‣ Production Goods Production Goods ‣ Support Goods Support Goods ‣ Installations ‣ Accessory Equipment ‣ Supplies ‣ Services LO 2 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

WHAT IS A NEW PRODUCT? ‣ Newness Compared with Existing Products ‣ Newness in Legal Terms ‣ Newness from the Company’s Perspective ‣ Newness from the Consumer’s Perspective LO 3 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

FIGURE 10-2 Consumption effects define newness LO 3 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

For how the kind of innovation present in this ketchup bottle and the innovation present in the Amazon Kindle affects marketing strategy, see the text. LO 3 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

WHAT ARE NEW SERVICES? ‣ Major service innovations ‣ Major process innovations ‣ Service-line extensions ‣ Process-line extensions ‣ Supplementary-service innovations ‣ Basic service improvements ‣ Style changes LO 3 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

WHY NEW PRODUCTS OR SERVICES SUCCEED OR FAIL ‣ Marketing Reasons for New-Product Failures ‣ Insignificant “point of difference” ‣ Incomplete market and product definition (Protocol)(Protocol) ‣ Too little market attractiveness ‣ Poor execution of the marketing mix ‣ Poor product quality on critical factors ‣ Bad timing ‣ No economical access to buyers LO 4 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

FIGURE 10-3 Why did these new products fail? LO 4 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

WHY NEW PRODUCTS OR SERVICES SUCCEED OR FAIL ‣ A Look at Some Failures ‣ What were they thinking? Organizational problems new- product failure. ‣ Not really listening to the “voice of the consumer.” ‣ Skipping steps in the new-product process. ‣ Pushing a poorly conceived product into the market to generate quick revenue. ‣ “Groupthink” in task force and committee meetings. ‣ Not learning critical takeaway lessons from past failures. ‣ How Marketing Dashboards Can Reduce New-Product Failures LO 4 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

FIGURE 10-4 Stages in the new-product process LO 5 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Stage 1: New-Product Strategy DevelopmentNew-Product Strategy Development ‣ Objectives of the Stage: Identify Markets and Strategic Roles ‣ Cross-Functional Teams ‣ Lead Users THE NEW-PRODUCT PROCESS LO 5 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Stage 2: Idea GenerationIdea Generation ‣ Customer and Supplier Suggestions ‣ Employee and Co-Worker Suggestions ‣ Research and Development Breakthroughs ‣ Competitive Products ‣ Universities, Inventors, and Small Technology Firms THE NEW-PRODUCT PROCESS LO 5 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Stage 3: Screening and EvaluationScreening and Evaluation ‣ Internal Approach ‣ External Approach ‣ Concept Tests THE NEW-PRODUCT PROCESS LO 5 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

3M’s new Post-it® Flag Highlighter LO 5 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

The use of online concept tests: an external evaluation method for new product ideas LO 5 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Stage 4: Business AnalysisBusiness Analysis ‣ Stage 5: DevelopmentDevelopment ‣ Stage 6: Market TestingMarket Testing ‣ Test Marketing ‣ Simulated Test Markets ‣ Virtual Reality Market Testing ‣ When Test Markets Do Not Work THE NEW-PRODUCT PROCESS LO 5 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

Mattel’s Barbie During development, laboratory tests like this one result in safer dolls for toys for children LO 5 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Stage 7: CommercializationCommercialization ‣ Slotting fee Slotting fee ‣ Failure fee Failure fee THE NEW-PRODUCT PROCESS © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

FIGURE 10-5 Marketing information and methods used in the new-product process LO 5 © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

VIDEO CASE 10 3M™ Greptile Grip™ Golf Glove: Great Gripping! © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

VIDEO CASE 10 3M™ Greptile Grip™ Golf Glove: Great Gripping! © 2011 McGraw-Hill Ryerson Ltd. All rights reserved. 3M Greptile

VIDEO CASE M™ Greptile Grip™ Golf Glove: Great Gripping! What are the characteristics of the target market for the 3M Greptile Grip golf glove? © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

VIDEO CASE M™ Greptile Grip™ Golf Glove: Great Gripping! What are the key points of difference of the 3M Greptile Grip golf glove when compared with competitors’ products, such as FootJoy and Nike? Substitute products, such as golf grips? © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

VIDEO CASE M™ Greptile Grip™ Golf Glove: Great Gripping! How does the Greptile Grip golf glove meet 3M’s three criteria for new products? © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

VIDEO CASE M™ Greptile Grip™ Golf Glove: Great Gripping! Because 3M has no prior products for the golf market, what special promotion and distribution problems might 3M have? © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

VIDEO CASE M™ Greptile Grip™ Golf Glove: Great Gripping! What would be some new markets and new applications of the greptile grip technology that 3M could pursue? © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ A good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers and is received in exchanges for money or some other unit of value. Product © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ A group of products 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. Product Line © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Products purchased by the ultimate consumer. Consumer Goods © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Products that assist directly or indirectly in providing products for resale. Business Goods © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Items that the consumer purchases frequently and with a minimum of shopping effort. Convenience Goods © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Items for which the consumer compares several alternatives on criteria such as price, quality, or style. Shopping Goods © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Items that a consumer makes a special effort to search out and buy. Specialty Goods © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Items that the consumer either does not know about or knows about but does not initially want. Unsought Goods © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Items used in the manufacturing process that become part of the final product. Production Goods © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Items used to assist in producing other goods and services. Support Goods © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ A statement that, before product development begins, identifies (1) a well-defined target market; (2) specific customer’ needs, wants, and preferences; an (3) what the product will do. Protocol © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ The sequence of activities a firm uses to identify business opportunities and convert them to a saleable good or service. New-Product Process © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Defining the role for a new product in terms of the firm’s overall corporate objectives. New-Product Strategy Development © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ A means to “delight the customer” by achieving quality through a highly disciplined process to focus on developing and delivering near-perfect products and services. Six Sigma © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Developing a pool of concepts as candidates for new products. Idea Generation © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ The third stage of the new product process which involves internal and external evaluations of the new- product ideas to eliminate those that warrant no further effort. Screening and Evaluation © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Involves specifying the features of the product and the marketing strategy needed to commercialize it and making necessary financial projections. Business Analysis © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Turning the idea on paper into a prototype. Development © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy. Market Testing © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Positioning and launching a new product in full-scale production and sales. Commercialization © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ Payment manufacturer makes to place a new item on a retailer’s shelf. Slotting Fee © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ A penalty payment made by a manufacturer to compensate the retailer for sales its valuable shelf space never made. Failure Fee © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.

‣ The number of product lines offered by a company. Product Mix © 2011 McGraw-Hill Ryerson Ltd. All rights reserved.