1. McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

2. Recognize the various terms that pertain to products and services. LO1 Identify the ways in which consumer and business goods can be classified. Explain the significance of “newness” in new products and services as it relates to the degree of consumer learning involved. LO3 LO2 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 10, YOU SHOULD BE ABLE TO: 10-2

3. Describe the factors contributing to a new product’s or service’s success or failure. Explain the purposes of each step of the new-product process. LO4 LO5 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 10, YOU SHOULD BE ABLE TO: 10-3

4. NEW PRODUCT REVOLUTIONS: APPLE AND ITS INNOVATION MACHINE 10-4

5.  Apple’s Innovation Machine  How the iPhone Came About  What the iPhone Can Do NEW PRODUCT REVOLUTIONS: APPLE AND ITS INNOVATION MACHINE 10-5

6. THE VARIATION OF PRODUCTS PRODUCT, PRODUCT LINE, AND PRODUCT MIX LO1  Product Product  Product Line Product Line  Product Mix Product Mix Product Item Stock Keeping Unit (SKU) 10-6

7. Little Remedies How does an extensive product line benefit both consumers and retailers? LO1 10-7

8. THE VARIATION OF PRODUCTS CLASSIFYING PRODUCTS LO1  Type of User Consumer Goods Business Goods 10-8

9. THE VARIATION OF PRODUCTS CLASSIFYING PRODUCTS LO1  Degree of Tangibility Nondurable Goods Durable Goods Services 10-9

10. CLASSIFYING CONSUMER AND BUSINESS GOODS CLASSIFYING CONSUMER GOODS LO2  Convenience Goods Convenience Goods  Shopping Goods Shopping Goods  Specialty Goods Specialty Goods  Unsought Goods Unsought Goods 10-10

11. Rolex Watch What type of consumer good? LO2 10-11

12. FIGURE 10-1 FIGURE 10-1 How a consumer good is classified affects what products consumers buy and the marketing strategies used 10-12

13. CLASSIFYING CONSUMER AND BUSINESS GOODS CLASSIFYING BUSINESS GOODS LO2  Derived Demand  Production Goods Production Goods  Support Goods Support Goods Supplies Industrial Services Installations Accessory Equipment 10-13

14. NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHAT IS A NEW PRODUCT? LO3  Newness Compared with Existing Products  Newness in Legal Terms 10-14

15. NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHAT IS A NEW PRODUCT? LO3  Newness From the Organization’s Perspective Product Line Extension Significant Jump in Innovation True Innovation 10-15

16. NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHAT IS A NEW PRODUCT? LO3  Newness From the Consumer’s Perspective Continuous Innovation Dynamically Continuous Innovation Discontinuous Innovation 10-16

17. FIGURE 10-2 FIGURE 10-2 The degree of “newness” in a new product affects the amount of learning effort consumers exert to use the product 10-17

18. MARKETING MATTERS Bought a Computer, Lawn Mower, and Dishwasher? Call the Geek Squad! 10-18

19. FIGURE 10-A FIGURE 10-A What it takes to launch one commercially successful new product 10-19

20. NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHY PRODUCTS SUCCEED OR FAIL LO4  Marketing Reasons for New-Product Failures Insignificant Points of Difference Incomplete Market and Product Definition Before Product Development Starts  Protocol Protocol Too Little Market Attractiveness 10-20

21. NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHY PRODUCTS SUCCEED OR FAIL LO4  Marketing Reasons for New-Product Failures Poor Execution of the Marketing Mix Poor Product Quality or Sensitivity to Customer Needs on Critical Factors Bad Timing No Access to Buyers 10-21

22. General Mills Fingos Why did this product fail? LO4 10-22

23. Thirsty Dog! and Thirsty Cat! Why did these products fail? LO4 10-23

24. MARKETING MATTERS What Separates New-Product Winners and Losers? 10-24

25. FIGURE 10-3 FIGURE 10-3 Why did these two new products fail? 10-25

26. NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL WHY PRODUCTS SUCCEED OR FAIL LO4 Not Listening to the “Voice” of the Consumer Skipping Steps in the New-Product Process  What Were They Thinking? Organizational Problems in New-Product Failure Marketing a Poorly Conceived Product Too Quickly “Groupthink” in Task Force & Committee Meetings Not Learning Lessons From Past Failures 10-26

27. USING MARKETING DASHBOARDS Monitoring Your New-Product Launch Household (HH) Trial and Repeat Percents 10-27

28. FIGURE 10-4 FIGURE 10-4 Stages in the new-product process 10-28

29. FIGURE 10-B FIGURE 10-B Strategic roles of most successful new products 10-29

30. THE NEW-PRODUCT PROCESS NEW-PRODUCT STRATEGY DEVELOPMENT LO5  New-Product Process New-Product Process SWOT Analysis  New-Product Strategy Development New-Product Strategy Development  Objectives: Identify Markets and Strategic Roles Environmental Scanning  Improve Innovation: Use Cross-Functional Teams 10-30

31. THE NEW-PRODUCT PROCESS IDEA GENERATION LO5  Idea Generation Idea Generation  Employee and Co-Worker Suggestions  Customer and Supplier Suggestions  R&D Breakthroughs  Competitive Products  Universities, Inventors, and Small Tech Firms 10-31

32. Volvo’s YCC How are new-product ideas generated? LO5 10-32

33. THE NEW-PRODUCT PROCESS SCREENING AND EVALUATION LO5  Screening and Evaluation Screening and Evaluation  External Approach  Internal Approach 10-33

34. THE NEW-PRODUCT PROCESS BUSINESS ANALYSIS AND DEVELOPMENT LO5  Business Analysis Business Analysis  Development Development 10-34

35. THE NEW-PRODUCT PROCESS MARKET TESTING LO5  Market Testing Market Testing  Test Marketing  Simulated Test Markets (STMs)  When Test Markets Don’t Work 10-35

36. FIGURE 10-5 FIGURE 10-5 Six important U.S. test markets 10-36

37. THE NEW-PRODUCT PROCESS COMMERCIALIZATION LO5  Commercialization Commercialization  Regional Rollouts  Burger King’s French Fries 10-37

38. FIGURE 10-6 FIGURE 10-6 Marketing information and methods used in each stage of the new- product process 10-38

39. THE NEW-PRODUCT PROCESS COMMERCIALIZATION LO5  The Risks and Uncertainties  Speed as a Factor in New-Product Success Slotting Fee Failure Fee Time to Market (TtM) Parallel Development Fast Prototyping 10-39

40. 3M GREPTILE ™ GRIP GOLF GLOVE: GREAT GRIPPING! VIDEO CASE 10 10-40

41. VIDEO CASE 10 3M 1. What are the characteristics of the target market for the 3M Greptile Grip golf glove? 10-41

42. VIDEO CASE 10 3M 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? 10-42

43. VIDEO CASE 10 3M 3. How does the Greptile Grip golf glove meet 3M’s three criteria for new products? 10-43

44. VIDEO CASE 10 3M 4. Since 3M has no prior products for the golf market, what special promotion and distribution problems might 3M have? 10-44

45. VIDEO CASE 10 3M 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, or marketing capabilities; and (g) access to consumers. 10-45

46. WHY NEW-PRODUCT DEVELOPMENT CAN BE A DICE ROLL: SOME FORECASTS SUPPLEMENTAL LECTURE NOTE 10-1 10-46

47. FIGURE 10-C FIGURE 10-C Why new-product development can be a dice roll: some forecasts 10-47

48. THE NEW-PRODUCT PROCESS AT 3M SUPPLEMENTAL LECTURE NOTE 10-2 10-48

49. 3M’s Successful New-Product Idea Ultrathon ™ Insect Repellent 10-49

50. FIGURE 10-D FIGURE 10-D 3M’s stages in the new- product process compared with Figure 10-4 10-50

51. WHAT WERE THEY THINKING? ANALYZING NEW-PRODUCT DISASTERS IN-CLASS ACTIVITY 10-1 10-51

52. 10-52

53. Problem Product A: Adam’s Body Smarts 10-53

54. Problem Product B: Coca Cola’s Surge 10-54

55. Problem Product C: Wheaties Dunk-A-Balls 10-55

56. Problem Product D: Garlic Cake 10-56

57. Problem Product E: Kellogg’s Special K Plus 10-57

58. Problem Product F: Dr. Care Toothpaste 10-58

59. 10-59

60. 10-60

61. FOCUS GROUP FOR CONVERGENT DIGITAL DEVICES IN-CLASS ACTIVITY 10-2 10-61

62. Apple iPhone 10-62

63. USING METHOD 6-3-5 TO FIND NEW-PRODUCT IDEAS FOR 3M’S ULTRATHON ™ INSECT REPELLENT IN-CLASS ACTIVITY 10-3 10-63

64. 3M Ultrathon ™ Insect Repellent Packet 10-64

65. 10-65

66. 10-66

67. 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. 10-67

68. Product Line A product line consists of 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. 10-68

69. Product Mix A product mix consists of the number of product lines offered by a company. 10-69

70. Consumer Goods Consumer goods are products purchased by the ultimate consumer. 10-70

71. Business Goods Business goods are products that assist directly or indirectly in providing products for resale. Also called B2B goods, industrial goods, or organizational goods. 10-71

72. Convenience Goods Convenience goods are items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort. 10-72

73. Shopping Goods Shopping goods are items for which the consumer compares several alternatives on criteria, such as price, quality, or style. 10-73

74. Specialty Goods Specialty goods are items that a consumer makes a special effort to search out and buy. 10-74

75. Unsought Goods Unsought goods are items that the consumer either does not know about or knows about but does not initially want. 10-75

76. Production Goods Production goods are items used in the manufacturing process that become part of the final product. 10-76

77. Support Goods Support goods are items used to assist in producing other goods and services. 10-77

78. 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. 10-78

79. New-Product Process The new-product process consists of the stages a firm goes through to identify business opportunities and convert them to a salable good or service. 10-79

80. 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. 10-80

81. Idea Generation Idea generation is the stage of the new-product process that involves developing a pool of concepts as candidates for new products. 10-81

82. 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. 10-82

83. 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. 10-83

84. Development Development is the stage of the new-product process that involves turning the idea on paper into a prototype. 10-84

85. 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. 10-85

86. Commercialization Commercialization is the stage of the new-product process that involves positioning and launching a new product in full-scale production and sales. 10-86

87. Slotting Fee A slotting fee is a payment a manufacturer makes to place a new item on a retailer’s shelf. 10-87

88. 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. 10-88