Chapter 10Chapter 10New Product ProcessNew Product Process

What is a Product?What is a Product?

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

Difference between a good and a Difference between a good and a service?service?

Terms to Describe a Terms to Describe a Company’s Assortment of Company’s Assortment of

ProductsProducts Product lineProduct line Product itemProduct item Product mix Product mix

Classifying ProductsClassifying Products

Consumer ProductsConsumer Products Convenience Convenience Shopping Shopping Specialty Specialty UnsoughtUnsought

Business Products Business Products Production Production Support Support

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Classification of Consumer ProductsClassification of Consumer Products

How Do You Define “New How Do You Define “New Product”Product”

Term “new” is hard to defineTerm “new” is hard to define If a product is functionally different If a product is functionally different

from existing products, it can be from existing products, it can be defined as new.defined as new.

Sometimes newness is revolutionarySometimes newness is revolutionary Sometimes it merely means adding Sometimes it merely means adding

features to an existing productfeatures to an existing product

What do these products have What do these products have in common?in common?

Bic PerfumeBic Perfume Fab 1 ShotFab 1 Shot Wheaties Dunk-A-BallsWheaties Dunk-A-Balls Dr. Care ToothpasteDr. Care Toothpaste Avert Virucidal TissuesAvert Virucidal Tissues FingoesFingoes La Choy’s Fresh and Lite Frozen EntreesLa Choy’s Fresh and Lite Frozen Entrees

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

Why Did this Product Fail?Why Did this Product Fail?

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

Many new products fail each Many new products fail each year.year.

Failures range from 33 percent to 90 Failures range from 33 percent to 90 percent depending on the industry.percent depending on the industry.

What is the New Product Process?What is the New Product Process? The stages a firm goes through to identify The stages a firm goes through to identify

business opportunities and convert them to a business opportunities and convert them to a salable good or service.salable good or service.

Stage 1: New-Product Strategy Stage 1: New-Product Strategy Development Development

Purpose:Purpose: Scan the environment to identify trends Scan the environment to identify trends

that present marketing opportunities or that present marketing opportunities or threats.threats.

Evaluate existing strengths and Evaluate existing strengths and weaknessesweaknesses

This stage serves as valuable input to This stage serves as valuable input to later stageslater stages

Stage 2: Idea GenerationStage 2: Idea Generation

Purpose – to identify as many new Purpose – to identify as many new product ideas as possibleproduct ideas as possible

SourcesSources

1. Customers1. Customers

2. Company Research and 2. Company Research and DevelopmentDevelopment

3. Sales representatives / employees3. Sales representatives / employees

4. Competitors 4. Competitors

Stage 3: ScreeningStage 3: Screening

Internal Approach – The firm establishes a Internal Approach – The firm establishes a set of criteria that the idea must pass in set of criteria that the idea must pass in order to be considered further.order to be considered further.

External Approach – Calls for testing the External Approach – Calls for testing the product conceptproduct concept with an appropriate with an appropriate group of target consumers. group of target consumers.

Relies on written descriptions of the Relies on written descriptions of the product and/or sketches. No physical product and/or sketches. No physical product yet. product yet.

Stage 4: Business AnalysisStage 4: Business Analysis

Assesses the potential profitability of Assesses the potential profitability of the product concept the product concept

Estimate salesEstimate sales Estimate costsEstimate costs

Stage 5: Product Stage 5: Product DevelopmentDevelopment

The product concept described on The product concept described on paper is turned into a physical paper is turned into a physical product called a product called a prototypeprototype..

The prototype is tested with sample The prototype is tested with sample groups from the target market. groups from the target market.

Stage 6: Market TestingStage 6: Market Testing

Product is tested under realistic Product is tested under realistic purchase conditions.purchase conditions.

Purpose – to see how targeted Purpose – to see how targeted consumers respond to product and consumers respond to product and other marketing mix elementsother marketing mix elements

Product is introduced in one or more Product is introduced in one or more test citiestest cities

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

Stage 7: CommercializationStage 7: Commercialization

Product is sold in the marketplace.Product is sold in the marketplace. Involves setting up:Involves setting up:

manufacturing facilitiesmanufacturing facilities Channels of distributionChannels of distribution Promotion for the productPromotion for the product

Will often use a regional roll outWill often use a regional roll out