1. PRODUCT DEVELOPMENT Student Notes

2. PRODUCT DEVELOPMENT  Is the process of creating new or improved products  Involves brainstorming, designing, building, testing, and marketing products  Is conducted by the research and development department of large companies  Consists of significant trial and error research

3. NEW PRODUCT DEVELOPMENT  Consists of recognizing product opportunities  Involves investigating and developing product concepts  Involves an organized research and development process

4. PRODUCT DEVELOPMENT PROCESS  Includes: idea generation idea screening concept assessment product development product testing commercialization evaluation

5. IDEA GENERATION  Consists of brainstorming new product ideas  Should be relevant to company objectives  Can come from a variety of sources: customer feedback competitors employees research and development teams

6. IDEA SCREENING  Includes evaluating product ideas and feasibility  Involves eliminating inappropriate or weak product ideas  Analyzes ideas on the basis of: practicality financial capability marketability demand and profit potential company objectives

7. CONCEPT ASSESSMENT  Includes evaluating design factors and influences, such as: production costs production capabilities feasibility and resources potential sales impact potential for risk or loss

8. PRODUCT DEVELOPMENT  Includes creating a physical model or sample of the product  Consists of engineering and technical evaluations, such as: durability tests range and motion studies health and safety assessments  Requires a prototype of the product

9. PROTOTYPE  Is a working model or sample of a product  May be a miniature version of a design  May consist of slightly different materials than the final model  Allows developers to study the product design and make additional changes before the final production

10. METHODS FOR PRODUCT DEVELOPMENT  Outsourcing Includes input, decisions, and work from businesses and individuals outside of the actual company may be utilized for specific product development tasks, such as: strategic design and specifications materials specifications packaging design assembly drawings user guides and owner manuals

11. METHODS FOR PRODUCT DEVELOPMENT  Include: In-house development may be unrealistic due to available resources and manpower allows companies to control product quality and production is conducted within the actual company

12. PRODUCT TESTING  Is expensive and complicated, but may ultimately save companies millions of dollars  May include the following strategies: focus groups test markets marketing research

13. FOCUS GROUPS  Include a selected group of people used to analyze and test the concept of a given product  Involve 8 to 12 people in a group interview process  Are usually held in a conference room and conducted by a moderator  Can be used to evaluate the effectiveness or likeability of a product

14. TEST MARKETS  Include marketing or selling a product in an exclusive area  Are used to determine potential demand for a product  Include a limited introduction of a product to analyze public reaction  Are used to prevent possible distribution of unsuccessful products  Are usually conducted within specific regions or cities  Do not provide a guarantee of actual success Approximately 5% of new products are ever sold on shelves.

15. MARKETING RESEARCH  Is the process of gathering, analyzing and collecting information about a particular target market, competitor or product  Is used to: develop or test products assess customer needs and attitudes determine sales prices evaluate market growth and potential verify competitor information

16. COMMERCIALIZATION  Includes introducing a product to the marketplace  Includes mass distribution to targeted customers  Requires advertising and marketing the product  Involves a great deal of cost and planning

17. WHY DO NEW PRODUCTS FAIL?  The market size was overestimated  Products were poorly designed or positioned  Production and development costs were too high  The commercialization process took too long and additional competitors emerged

18. ADDITIONAL PRODUCT PLANNING  Includes: monitoring new or existing products improving current products creating product variations eliminating weak products

19. NEW PRODUCTS  Must be continually monitored  Account for nearly 35 percent of a company’s total sales  Can help build or sustain a brand image  May increase mark-ups and profit rates due to “novelty”  Become a major component of a company’s product mix Line extensions include adding new products or product lines.

20. IMPROVED PRODUCTS  Are usually identified by the words “New & Improved”  Include a complete revision or new model of an item examples include: Pentium computer processor has been improved multiple times (Pentium 2®, Pentium 3®, Pentium 4®) car companies must continually improve their gas mileage or safety features in order to sustain sales

21. PRODUCT VARIATION  Consists of making slight variations or changes to an original product  Is used to create different models, shapes, sizes, colors, and uses for a specific item  Can help to increase sales and popularity for an established brand examples include: Febreeze® odor remover spray Swifter® dry mop

22. ELIMINATING WEAK PRODUCTS  Is an important strategy for the long term success of a business  Allows companies to invest in more successful items  Products may be eliminated for any of the following reasons: lack of customer appeal product or service is obsolete or has been replaced product conflicts with company objectives lack or loss of profit

23. FAILED PRODUCTS  Include: Coca Cola’s Surge® drink Crystal Clear Pepsi® Edible Deodorant Garlic Cake Heinz™ green ketchup Heinz™ chocolate French fries