Chapter 10 New Product Process

What is a Product? A good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers which they receive in exchange for money or some other unit of value. A good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers which they receive in exchange for money or some other unit of value. Difference between a good and a service? Difference between a good and a service?

Terms to Describe a Company’s Assortment of Products Product line Product line Product item Product item Product mix Product mix

Classifying Products Consumer Products Consumer Products Convenience Convenience Shopping Shopping Specialty Specialty Unsought Unsought Business Products Business Products Production Production Support Support

Slide Classification of Consumer Products Classification of Consumer Products

How Do You Define “New Product” Term “new” is hard to define Term “new” is hard to define If a product is functionally different from existing products, it can be defined as new. If a product is functionally different from existing products, it can be defined as new. Sometimes newness is revolutionary Sometimes newness is revolutionary Sometimes it merely means adding features to an existing product Sometimes it merely means adding features to an existing product

What do these products have in common? Bic Perfume Bic Perfume Fab 1 Shot Fab 1 Shot Wheaties Dunk-A-Balls Wheaties Dunk-A-Balls Dr. Care Toothpaste Dr. Care Toothpaste Avert Virucidal Tissues Avert Virucidal Tissues Fingoes Fingoes La Choy’s Fresh and Lite Frozen Entrees La Choy’s Fresh and Lite Frozen Entrees

Slide FIGURE 10-3 Why did these new products fail?

Why Did this Product Fail? La Choy launched a line of frozen egg rolls. Not measly little appetizer egg rolls, but big meaty egg rolls that a consumer would eat as a main course. These egg rolls were a part of the Fresh and Lite line of low fat frozen Chinese entrees. La Choy had a well known brand name; ethnic cuisine was soaring in popularity; so were frozen meals. Why did this product fail?

Many new products fail each year. Failures range from 33 percent to 90 percent depending on the industry. Failures range from 33 percent to 90 percent depending on the industry.

What is the New Product Process? The stages a firm goes through to identify business opportunities and convert them to a salable good or service. The stages a firm goes through to identify business opportunities and convert them to a salable good or service.

Stage 1: New-Product Strategy Development Purpose: Purpose: Scan the environment to identify trends that present marketing opportunities or threats. Scan the environment to identify trends that present marketing opportunities or threats. Evaluate existing strengths and weaknesses Evaluate existing strengths and weaknesses This stage serves as valuable input to later stages This stage serves as valuable input to later stages

Stage 2: Idea Generation Purpose – to identify as many new product ideas as possible Purpose – to identify as many new product ideas as possible Sources Sources 1. Customers 1. Customers 2. Company Research and Development 2. Company Research and Development 3. Sales representatives / employees 3. Sales representatives / employees 4. Competitors 4. Competitors

Stage 3: Screening Internal Approach – The firm establishes a set of criteria that the idea must pass in order to be considered further. Internal Approach – The firm establishes a set of criteria that the idea must pass in order to be considered further. External Approach – Calls for testing the product concept with an appropriate group of target consumers. External Approach – Calls for testing the product concept with an appropriate group of target consumers. Relies on written descriptions of the product and/or sketches. No physical product yet. Relies on written descriptions of the product and/or sketches. No physical product yet.

Stage 4: Business Analysis Assesses the potential profitability of the product concept Assesses the potential profitability of the product concept Estimate sales Estimate sales Estimate costs Estimate costs

Stage 5: Product Development The product concept described on paper is turned into a physical product called a prototype. The product concept described on paper is turned into a physical product called a prototype. The prototype is tested with sample groups from the target market. The prototype is tested with sample groups from the target market.

Stage 6: Market Testing Product is tested under realistic purchase conditions. Product is tested under realistic purchase conditions. Purpose – to see how targeted consumers respond to product and other marketing mix elements Purpose – to see how targeted consumers respond to product and other marketing mix elements Product is introduced in one or more test cities Product is introduced in one or more test cities

Slide FIGURE 10-5 Six important U.S. test markets and the “demographics winner”: Wichita Falls, Texas, metropolitan statistical area

Stage 7: Commercialization Product is sold in the marketplace. Product is sold in the marketplace. Involves setting up: Involves setting up: manufacturing facilities manufacturing facilities Channels of distribution Channels of distribution Promotion for the product Promotion for the product Will often use a regional roll out Will often use a regional roll out