1. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-1 DEVELOPING NEW PRODUCTS AND SERVICES C HAPTER

2. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-2 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 significance of “newness” in new products and services as it relates to the degree of consumer learning involved.

3. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-3 AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO: 4.Describe the factors contributing a new product’s or service’s success or failure. 5.Explain the purposes of each step of the new-product process.

4. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-4 3M’S NEW GREPTILE GRIP GOLF GLOVE: HOW TO GET TO THE TOP OF THE LEADER BOARD The Product? The Target Market? The Special Marketing Task?

5. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-5 THE VARIATIONS OF PRODUCTS Product  Product Line Product Line  Product Mix Product Mix Product Line and Product Mix Product Item Stock Keeping Unit (SKU)

6. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-6 Little Remedies How does an extensive product line benefit both consumers and retailers?

7. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-7 THE VARIATIONS OF PRODUCTS  Type of User  Degree of Tangibility Classifying Products Consumer Goods Consumer Goods Business Goods Nondurable Good Durable Good Services

8. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-8 THE VARIATIONS OF PRODUCTS The Uniqueness of Services  Intangibility  Inconsistency  Inseparability  Inventory Idle Production Capacity Idle Production Capacity  The Four I’s of Services

9. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-9 FIGURE 10-1 FIGURE 10-1 Importance of services in the U.S. gross domestic product (GDP)

10. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-10 FIGURE 10-A FIGURE 10-A The 4 I’s of services

11. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-11 CLASSIFYING GOODS AND SERVICES  Convenience Goods Classifying Consumer Goods  Shopping Goods  Specialty Goods  Unsought Goods

12. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-12 FIGURE 10-2 FIGURE 10-2 Classification of consumer goods

13. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-13 Raymond Weil Watch What type of consumer good?

14. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-14  Production Goods Classifying Business Goods  Support Goods Installations Accessory Equipment Supplies Industrial Services CLASSIFYING GOODS AND SERVICES  Derived Demand

15. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-15 Classifying Services CLASSIFYING GOODS AND SERVICES  Delivery by People or Equipment  Profit or Nonprofit Organizations  Government Sponsored

16. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-16 FIGURE 10-B FIGURE 10-B Service classifications

17. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-17 Concept Check 1. Explain the difference between product mix and product line. A: The product mix is the number of product lines offered by a company. 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.

18. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-18 Concept Check 2. What are the four main types of consumer goods? A: convenience, shopping, specialty, and unsought

19. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-19 Concept Check 3. What are three ways to classify services? A: (1) delivered by people or equipment, (2) profit or nonprofit, and (3) government sponsored or not

20. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-20 NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL  Functionally Different from Existing Products What is a New Product?  FTC: Newness = 6 Months or less After Regular Distribution  Company: Simply Anything Different

21. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-21 Sony’s PlayStation 3 and Microsoft’s Xbox How does the term “new” apply? XboxPS3

22. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-22 NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL What is a New Product? Continuous Innovation  Newness from the Consumer’s Perspective Dynamically Continuous Innovation Discontinuous Innovation

23. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-23 FIGURE 10-3 FIGURE 10-3 Product “newness,” as defined by the degree of consumer learning needed to use the product

24. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-24 NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL Why Products Succeed or Fail Insignificant Point of Difference  Marketing Reasons for New-Product Failures

25. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-25 FIGURE 10-D FIGURE 10-D What it takes to launch one commercially successful new product

26. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-26 General Mills Fingos Why did this product fail?

27. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-27 NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL 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 Poor Execution of the Marketing Mix: Name, Price, Promotion, and Distribution

28. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-28 NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL 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

29. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-29 Thirsty Dog! and Thirsty Cat! Why did these products fail?

30. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-30 FIGURE 10-4 FIGURE 10-4 Why did these new products fail?

31. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-31 Concept Check 1. From a consumer’s viewpoint, what kind of innovation would an improved electric toothbrush be? A: continuous innovation

32. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-32 Concept Check 2. What does “insignificant point of difference” mean as a reason for new-product failure? A: The product must have superior characteristics that deliver unique benefits to the user compared to those of competitors.

33. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-33 THE NEW-PRODUCT PROCESS  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

34. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-34 FIGURE 10-5 FIGURE 10-5 Stages in the new-product process

35. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-35 FIGURE 10-E FIGURE 10-E Strategic roles of most successful new products

36. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-36 THE NEW-PRODUCT PROCESS  Customer and Supplier Suggestions Idea Generation  Employee and Co-Worker Suggestions  Research and Development Breakthroughs  Competitive Products

37. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-37 Volvo’s YCC How are new-product ideas generated?

38. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-38 THE NEW-PRODUCT PROCESS  Internal Approach Screening and Evaluation Concept Tests  External Approach

39. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-39 Frito-Lay Natural Snacks How are new-product ideas screened & evaluated?

40. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-40 Concept Check A: These are: (1) new-product strategy development; (2) idea generation; (3) screening and evaluation; (4) business analysis; (5) development; (6) market testing; and (7) commercialization. 1. What are the seven stages in the new- product process?

41. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-41 Concept Check A: Customer and supplier suggestions, employee suggestions, R&D breakthroughs, and competitive products. 2. What are main sources of new- product ideas?

42. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-42 THE NEW-PRODUCT PROCESS  Prototype Business Analysis  Assessing the “Business Fit” of the New Product  Big G plus Pillsbury: Finding Synergies, Segments, and Partners

43. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-43 Pillsbury What synergies, segments, or partners?

44. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-44 THE NEW-PRODUCT PROCESS  “Failure Analysis” Development  Safety Tests

45. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-45 Mattel’s Barbie Why should laboratory and safety tests be done?

46. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-46 THE NEW-PRODUCT PROCESS  Test Marketing Market Testing  When Test Markets Don’t Work

47. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-47 FIGURE 10-6 FIGURE 10-6 Six important U.S. test markets and the “demographics winner”: Wichita Falls, Texas, metropolitan statistical area

48. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-48 THE NEW-PRODUCT PROCESS  Burger King’s French Fries: The Complexities of Commercialization Commercialization  Speed as a Factor in New-Product Success  Winning Strategies in Commercializing Services Time to Market (TtM) Parallel Development Fast Prototyping  Regional Rollouts

49. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-49 FIGURE 10-7 FIGURE 10-7 Marketing information and methods used in the new-product process

50. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-50 Burger King French Fries Why is commercialization risky?

51. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-51 Hewlett-Packard Cross-Functional Team Why is time to market (TtM) important?

52. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-52 Concept Check 1. How does the development stage of the new-product process involve testing the product inside and outside the firm? A: Internally, laboratory tests are done to see if the product achieves physical, quality, and safety standards; externally, consumer tests are done.

53. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-53 Concept Check 2. What is a test market? A: A test market is a city that is viewed as being representative of U.S. consumers in terms of demographics and brand purchase behaviors, is far enough from big markets to allow low-cost advertising, and has tracking systems to measure sales.

54. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-54 Concept Check A: Commercialization involves positioning and launching a new product in full-scale production and sales and is the most expensive stage for most new products. 3. What is commercialization of a new product?

55. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-55 JALAPEÑO SODA, ANYONE? GOING ONLINE

56. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-56 1. Access the NewProductWorks website. Study the “Hits and Misses” categories: “We Expect Them to be Successes,” “Jury is Out,” “Failures,” and “Favorite Failures.” Pick two of the failed products and identify the reasons that led to their failure. Going Online

57. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-57 Going Online 2. Contrast these failed products with those that are deemed successes to learn why they became “sure-fire winners.”

58. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-58 3M ™ GREPTILE GRIP ™ GOLF GLOVE: GREAT GRIPPING! VIDEO CASE 10

59. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-59 VIDEO CASE 10 3M

60. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-60 1. What are the characteristics of the target market for the 3M Greptile Grip golf glove? VIDEO CASE 10 3M

61. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-61 2. What are the key points of difference of the 3M Greptile Grip golf glove when compared to competitors’ products, such as FootJoy and Nike? Substitute products, such as golf grips? VIDEO CASE 10 3M

62. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-62 3. How does the Greptile Grip golf glove meet 3M’s three criteria for new products? VIDEO CASE 10 3M

63. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-63 4. Since 3M has no prior products for the golf market, what special promotion and distribution problems might 3M have? VIDEO CASE 10 3M

64. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-64 5. How would you rate the 3M Greptile Grip golf glove on the following reasons for success and failure: (a) significant points of difference; (b) size and growth of the golf market; (c) product quality; (d) market timing; (e) execution of the marketing mix; (f) synergy or fit with 3M’s R&D, manufacturing and/or marketing capabilities; and (g) access to consumers? VIDEO CASE 10 3M

65. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-65 WHY NEW-PRODUCT DEVELOPMENT CAN BE A DICE ROLL: SOME FORECASTS SUPPLEMENTAL LECTURE NOTE 10-1

66. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-66 FIGURE 10-C FIGURE 10-C Why new-product development can be a dice roll: some forecasts

67. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-67 THE NEW-PRODUCT PROCESS AT 3M SUPPLEMENTAL LECTURE NOTE 10-2

68. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-68 3M New-Product Idea Ultrathon Insect Repellent

69. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-69 WHAT WERE THEY THINKING? ANALYZING SOME NEW PRODUCT DISASTERS IN-CLASS ACTIVITY 10-1

70. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-70

71. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-71 Problem Product A: Adam’s Body Smarts

72. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-72 Problem Product B: Coca Cola’s Surge

73. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-73 Problem Product C: Wheaties Dunk-A-Balls

74. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-74 Problem Product D: Garlic Cake

75. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-75 Problem Product E: Kellogg’s Special K Plus

76. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-76 Problem Product F: Dr. Care Toothpaste

77. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-77

78. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-78

79. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-79 HOW CAN 3M ENTER THE PET CARE MARKET? IN-CLASS ACTIVITY 10-2

80. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-80 3M Pet Care Product Lines: End of 2005

81. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-81 3M Pet Care Liquid Bandage: Early 2006

82. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-82

83. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-83

84. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-84

85. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-85

86. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-86 3M Pet Care Health Market Products: 2006

87. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-87 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.

88. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-88 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.

89. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-89 Product Mix The product mix is the number of product lines offered by a company.

90. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-90 Consumer Goods Consumer goods are products purchased by the ultimate consumer.

91. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-91 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.

92. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-92 Services Services are intangible activities or benefits that an organization provides to consumers in exchange for money or something else of value.

93. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-93 Idle Production Capacity Idle production capacity occurs when the service provider is available but there is no demand.

94. Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved. Slide 10-94 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.