New Products and Services Chapter 10

Product “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.” Tangible- Color, taste Intangible- Healthier or wealthier

Products Product item Product line Product mix Nike Air Jordan Nike shoes Product mix Nike shoes and clothes PL- “A group of products that are closely related because they satisfy a class of needs, are used together, are distributed through the same type of outlets, or fall within a given price range.” Nike: Clothes and shoes Number of product lines

Product Classifications Type of user Consumer goods Business goods Degree of tangibility Durable Nondurable Service

Consumer v. Business Goods Differences based on Effort spent in decision Attributes used in purchase Frequency of purchase

Consumer Goods Convenience goods Shopping goods Specialty goods Unsought goods

Business Goods Production goods Support goods Installations Accessory equipment Supplies Services

What is New? Newness compared with Existing Products Newness in legal terms Newness from company’s perspective Newness from consumers’ perspective

Why do New Products Fail? Insignificant “point of difference” Incomplete market and product definition before development starts Protocol Too little market attentiveness Poor execution of marketing mix Bad timing No economical access to buyers Protocol- Statement before development begins that identifies a well-defined target market, specific customers’ needs, wants, and preferences, and what the product will be and do

New Product Process New-product strategy development Idea generation Screening and evaluation Business analysis Development Market testing Commercialization Process to identify business opportunities and convert them to a salable good or service

New-product strategy development Identify markets and strategic roles Environmental scanning SWOT analysis Defining the role for a new product in terms of the firm’s overall corporate objectives

Idea Generation Customer and supplier suggestions Employee and co-worker suggestions R&D breakthroughs Competitive products Developing concepts as candidates for new products R&D- Costly

Screening & Evaluation Two approaches Internal approach External approach Internal and external evaluations of new-product ideas to eliminate those that warrant no further effort. Internal- Does it meet corporate objectives? Technically feasible? External- Customers. Show drawing Who would use this? What for?

Business Analysis Last checkpoint before capital is committed Look at product and marketing strategy needed to commercialize it What will be effect on current products? Will need new distribution channels? Financial projections

Development “Paper into prototype” Testing against standards Pharmaceutical testing example at Merck

Market Testing Company chooses a specific market, based on criteria Advantages Disadvantages Simulated test markets Exposing product to prospective consumers under realistic conditions to see if they buy Adv-Helps to forecast sales on larger stage; receive input from customers, Disadv- Reveal product/plan to customers; costly

Commercialization Positioning and launching a product Most expensive step Slotting fee Failure fee Sf- Supermarkets require payment to put product on the shelf FF- If sales target is not met, may have to pay failure fee to compensate for sales that area of the shelf did not make.