Ch.9 Developing New Products and Services

Good
Has tangible attributes that a consumer’s five senses can perceive.
Nondurable Good
Item consumed in one or a few uses, such as food products and fuel; RELY HEAVILY ON CONSUMER ADVERTISING.
Durable Good
One that usually lasts over many uses, such as appliances, cars, and smartphones; EMPHASIZE PERSONAL SELLING.
Services
Intangible activities or benefits that an organization provides to satisfy consumers’ needs in exchange for money or something else of value.
Idea
A thought that leads to a product or action, such as a concept for a new invention or getting people out to vote.
3 Categories for Equipment-Based Services
Services do not have the marketing concern of inconsistency because people are removed from the provision of the service.

1. Automated (self-service)
2. Those operated by relatively unskilled operators
3. Those operated by skilled operators

Federal Trade Commission (FTC)
Advises that the term “new” be limited to use with a product up to six months after it enters regular distribution; the difficulty with this suggestion is in the interpretation of the term “regular.”
Product
Not only physical goods but services and ideas as well.
Consumer Products
Products purchased by the ultimate consumer.
Business Products
Products organizations buy that assist in providing other products for resale.
2 Classifying Products
1. Consumer products – not only physical goods but services and ideas as well
2. Consumer products – products purchased by the ultimate consumer
4 Types of Consumer Products
1. Convenience product – items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort; PROMOTION STRESSES PRICE, AVAILABILITY, AND AWARENESS

2. Shopping product – items for which the consumer compares several alternatives on criteria such as price, quality, or style; PURCHASED INFREQUENTLY AND REQUIRE EXTENDED SHOPPING TIME TO COMPARE OFFERINGS

3. Specialty product – items that the consumer makes a special effort to search out and buy

4. Unsought product – items that the consumer does not know about or knows about but does not initially want

Convenience Product
Items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort.
Shopping Product
Items for which the consumer compares several alternatives on criteria such as price, quality, or style.
Specialty Product
Items that the consumer makes a special effort to search out and buy.
Unsought Product
Items that the consumer does not know about or knows about but does not initially want.
Derived Demand
Sales of business products frequently result (or are derived) from the sale of consumer products.
Components
Items that become part of the final product; includes raw materials such as lumber, as well as assemblies such as a Ford car engine.
New Product
Can only be classified as such if the product is functionally different from existing products.
Support Products
Items used to assist in producing other products and services; products such as tools and repair services.
4 Things to Assist Support Products
1. Installations – buildings and fixed equipment
2. Accessory equipment – tools and office equipment
3. Supplies – stationary, paper clips, and brooms
4. Industrial services – maintenance, repair, and legal services
3 Ways to Deliver Services
1. People or equipment
2. Business firms or nonprofit organizations
3. Government agencies
4 I’s of Services
Four unique elements that distinguish services from goods.

1. Intangibility – being intangible, services can’t be touched or seen before the purchase decision

2. Inconsistency – services depend on the people who provide them, so quality varies with each person’s capabilities and day to day job performance; PHILADELPHIA PHILLIES

3. Inseparability – consumer cannot distinguish the service provider from the service itself

4. Inventory – many goods have inventory handling costs that relate to their storage, perishability, and movement; idle production capacity

Idle Production Capacity
When the service provider is available but there is no demand for the service.
Gap Analysis
Differences between the consumer’s expectations and his or her actual experiences; asks consumers to assess their expectations and experiences on dimensions of service quality.
3 Dimensions of Service Quality for Airline Customers
1. Reliability – flight on time?
2. Tangibility – gate, plane, and baggage area clean?
3. Responsiveness – flight attendants willing to answer my questions?
Product Class
Industry to which they belong.
Product Forms
Products within a product class.
Product Item
Specific product that has a unique brand, size, or price.
Stock Keeping Unit (SKU)
Unique identification number that defines an item for ordering or inventory purposes.
Product Line
Group of products that are closely related because they are similar in terms of consumer needs and uses, market segments, sales outlets, or prices.
Product Mix
All the product lines offered by a company.
Continuous Innovation
Consumers don’t need to learn new behaviors.
Dynamically Continuous Innovation
Minor changes in behavior are required.
Discontinuous Innovation
Involves making the consumer learn entirely new consumption patterns to use the product.
3 Types of Innovation
1. Continuous innovation – consumers don’t need to learn new behaviors
2. Dynamically continuous innovation – minor changes in behavior are required
3. Discontinuous innovation – involves making the consumer learn entirely new consumption patterns to use the product
Regular Distribution
Difficulty with interpretation of this term.
Product Line Extension
Lowest level, least risk.
Brand Extension
Involves putting an established brand name on a new product in an unfamiliar market.
3 Step Protocol of New Product or Service
1. Well-defined target market
2. Specific customers’ needs, wants, and preferences
3. What the product will be and do to satisfy consumers
8 Reasons for New-Product Failures
1. Insignificant point of difference – research shows that a distinctive point of difference is the single most important factor for a new product to defeat competing one

2. Incomplete market and product protocol before
product development starts – without this protocol firms try to design a vague product for a phantom market

3. Not satisfying customer needs on critical factors – overlapping somewhat with #1, this factor stresses that problems on one or two critical factors can kill the product, even though the general quality is high

4. Bad timing – results when a product is introduced too soon, too late, or when consumer tastes are shifting dramatically

5. No economical access to buyers – grocery products

6. Poor product quality – factor often results when a product is not thoroughly tested

7. Poor execution of the marketing mix; brand name, package, price, promotion, distribution – somewhere in the marketing mix there can be a showstopper that kills the product

8. Too little market attractiveness – the ideal is a large target market with high growth and real buyer need

2 Organizational Inertia in New-Product Failures
1. Encountering “groupthink” in task force and committee meetings
2. Avoiding the “NIH problem”
New-Product Process
Seven stages an organization goes through to identify business opportunities and convert them into salable products or services.
7 Stages of New-Product Process
1. New-product strategy development – defines the role for a new product in terms of the firm’s overall objectives; SWOT ANALYSIS AND ENVIRONMENTAL SCANNING

2. Idea generation – involves developing a pool of concepts to serve as candidates for new products , building upon the previous stages’ results

3. Screening and evaluation – internally and externally evaluates new-product ideas to eliminate those that warrant no further effort

4. Business analysis – specifies the features of the product and the marketing strategy needed to bring it to market and make financial projections

5. Development – turns the idea on paper into a prototype

6. Market testing – involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy

7. Commercialization – positions and launches a new product in full-scale production and sales

Crowdsourcing
Involves generating insights leading to actions based on ideas from massive numbers of people.
Nontraditional Firms
Smaller; small technology firms and even small, nontraditional form in adjacent industries provide creative advances.
Universities
Many universities have technology transfer centers that often partner with business firms to commercialize faculty inventions.
Inventors
Inventions.
Crowdfunding
Way to gather an online community of supporters to financially rally around a specific project that is unlikely to get resources from traditional sources such as banks or venture capital firms.
5 Crowdfunding Sources
1. Crowdrise – charitable causes
2. Crowdtilt – anything
3. Fundable – early stage financing for start-up businesses
4. Rally – nonprofits, artists, musicians, entrepreneurs
5. GiveForward – medical causes
Customer Experience Management (CEM)
Process of managing the entire customer experience within the company.
Concept Tests
External evaluations with consumers that consist of preliminary testing of a new-product idea rather than an actual product; PART OF THE SCREENING AND EVALUATION STAGE OF THE NEW-PRODUCT PROCESS.
Off-Peak-Pricing
Charge different prices during different times of the day or during different days of the week to help match the supply and demand for their services.
3 Types of Test Markets
1. Standard test markets – a company develops a product and then attempts to sell it through normal distribution channels in a number of test-market cities

2. Controlled test markets – involves contracting the entire test program to an outside service

3. Simulated test markets (STM) – technique that somewhat replicates a full-scale test market

Standard Test Markets
A company develops a product and then attempts to sell it through normal distribution channels in a number of test-market cities.
Controlled Test Markets
Involves contracting the entire test program to an outside service.
Simulated Test Markets (STM)
Technique that somewhat replicates a full-scale test market.
When Test Markets Don’t Work
Test marketing a service is very difficult because consumers can’t see what they are buying.
Slotting Fee
Payment a manufacturer makes to place a new item on a retailer’s shelf.
Failure Fee
Penalty payment a manufacturer makes to compensate a retailer for devoting valuable shelf space to a product that failed to sell.
Regional Rollouts
Introduce a product sequentially into geographical areas of the United States to allow production levels and marketing activities to build up gradually, to minimize the risk of new-product failure.
Time to Market (TtM)
Often vital in introducing a new product.
Parallel Development
Cross-functional team members who conduct the simultaneous development of both the product and the production process stay with the product from conception to production.
Fast Prototyping
“Do it, try it, fix it” approach– encouraging continuing improvement even after the initial design.
Business Researchers
Emphasize that firms must actively involve customers and suppliers in the new-product development process; this means the focus should be on what the new product will do for them rather than simply what they want.
X-1 Products Target Market
Initial target market are athletes who wanted waterproof, sweatproof, and weatherproof audio equipment.
Garlic Cake
Because the company forgot to explain what this bread was meant for, the product ended in failure; this information should have been a key promotional (advertising) element of the marketing mix.
Business Analysis for Services
Involves using capacity management to find ways to match the availability of the service offering to when it is needed.

Example: Airlines and mobile phone service providers use off-peak pricing to change different prices during different times of the day or during different days of the week to help match the supply and demand for their services.

Expectations of a Service
Influenced by word-of-mouth communications, personal needs, past experiences, and promotional activities, while actual experiences are determined by the way an organization actually delivers its service.