© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 10-1

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 10-2 DEVELOPING NEW PRODUCTS AND SERVICES C HAPTER

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 10-3 AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 10-4 AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 4.Describe the factors contributing a product’s or service’s failure. 5.Explain the purposes of each step of the new-product process.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE VARIATIONS OF PRODUCTS Slide 10-6 Product  Product Line Product Line  Product Mix Product Mix Product Line and Product Mix Product Item Stock Keeping Unit (SKU)

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 10-7 Little Remedies How does an extensive product line benefit both consumers and retailers?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE VARIATIONS OF PRODUCTS Slide 10-8  Type of User  Degree of Tangibility Classifying Products Consumer Goods Consumer Goods Business Goods Nondurable Good Durable Good Services  Services and New-Product Development

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CLASSIFYING CONSUMER AND BUSINESS GOODS Slide 10-9  Convenience Goods Convenience Goods Classification of Consumer Goods  Shopping Goods Shopping Goods  Specialty Goods Specialty Goods  Unsought Goods Unsought Goods

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-1 FIGURE 10-1 Classification of consumer goods

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Raymond Weil Watch What type of consumer good?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin CLASSIFYING CONSUMER AND BUSINESS GOODS Slide  Production Goods Production Goods Classification of Business Goods  Support Goods Support Goods Installations Accessory Equipment Supplies Industrial Services

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Slide  Newness Compared with Existing Products What is a New Product?  Newness in Legal Terms (Regular Distribution?)  Newness from the Company’s Perspective Regular Distribution

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Slide What is a New Product? Continuous Innovation  Newness from the Consumer’s Perspective Dynamically Continuous Innovation Discontinuous Innovation

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-2 FIGURE 10-2 Consumption effects define newness

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Slide Why Products Succeed or Fail Insignificant Point of Difference  Marketing Reasons for New-Product Failures

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-B FIGURE 10-B What it takes to launch one commercially successful new product

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Slide Why Products Succeed or Fail  Marketing Reasons for New-Product Failures Too Little Market Attractiveness Incomplete Market and Product Definition Before Product Development Starts  Protocol Protocol Poor Execution of the Marketing Mix: Name, Price, Promotion, and Distribution

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Slide Why Products Succeed or Fail  Marketing Reasons for New-Product Failures Bad Timing Poor Product Quality or Insensitivity to Customer Needs on Critical Factors No Economic Access to Buyers  A Look at Some Failures

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-3 FIGURE 10-3 Why did these new products fail?

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NEW-PRODUCT PROCESS Slide  Objectives of the Stage: Identify Markets and Strategic Roles  3M: Cross-Functional Teams and Six Sigma New-Product Process Cross-Functional Teams New-Product Strategy Development Six Sigma

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-4 FIGURE 10-4 Stages in the new-product process

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NEW-PRODUCT PROCESS Slide  Customer and Supplier Suggestions Idea Generation  Employee and Co-Worker Suggestions  Research and Development Breakthroughs  Competitive Products

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NEW-PRODUCT PROCESS Slide  Internal Approach Screening and Evaluation Concept Tests  External Approach

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NEW-PRODUCT PROCESS Slide  Prototype Business Analysis Development

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NEW-PRODUCT PROCESS Slide  Test Marketing Market Testing  Simulated (or Laboratory) Test Markets (STM)  When Test Markets Don’t Work

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-5 FIGURE 10-5 Six important U.S. test markets and the “demographics winner”: Wichita Falls, Texas, metropolitan statistical area

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin THE NEW-PRODUCT PROCESS Slide  Burger King’s French Fries: The Complexities of Commercialization Commercialization  Speed as a Factor in New-Product Success  The Risks and Uncertainties of the Commercialization Stage Slotting Fee Failure Fee Time to Market (TtM) Parallel Development Fast Prototyping

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide FIGURE 10-6 FIGURE 10-6 Marketing information and methods used in the new-product process

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Product A product is a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers and is received in exchange for money or some other unit of value.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Product Line A product line is 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 type of outlets, or fall within a given price range.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Product Mix The product mix is the number of product lines offered by a company.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Consumer Goods Consumer goods are products purchased by the ultimate consumer.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Business Goods Business goods are products that assist directly or indirectly in providing products for resale. Also called as B2B goods, industrial goods, or organizational goods.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Convenience Goods Convenience goods are items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Shopping Goods Shopping goods are items for which the consumer compares several alternatives on criteria, such as price, quality, or style.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Specialty Goods Specialty goods are items that a consumer makes a special effort to search out and buy.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Unsought Goods Unsought goods are items that the consumer either does not know about or knows about but does not initially want.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Production Goods Production goods are items used in the manufacturing process that become part of the final product.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Support Goods Support goods are items used to assist in producing other goods and services.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Protocol A protocol is 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide New-Product Process The new-product process consists of seven stages a firm goes through to identify business opportunities and convert them to a salable good or service.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide New-Product Strategy Development New-product strategy development is the stage of the new-product process that defines the role for a new product in terms of the firm’s overall corporate objectives.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Six Sigma Six Sigma is 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.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Idea Generation Idea generation is the stage of the new- product process that involves developing a pool of concepts as candidates for new products.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Screening and Evaluation Screening and evaluation is the stage of the new-product process that involves internal and external evaluations of the new-product ideas to eliminate those that warrant no further effort.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Business Analysis Business analysis is the stage of the new-product process that involves specifying the product features and marketing strategy and making necessary financial projections needed to commercialize a product.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Development Development is the stage of the new- product process that involves turning the idea on paper into a prototype.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Market Testing Market testing is the stage of the new-product process that involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Commercialization Commercialization is the stage of the new-product process that involves positioning and launching a new product in full-scale production and sales.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Slotting Fee A slotting fee is a payment a manufacturer makes to place a new item on a retailer’s shelf.

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide Failure Fee A failure fee is a penalty payment a manufacturer makes to compensate a retailer for sales its valuable shelf space failed to make.