Chapter 9 Product Planning and Development

Sommers

Barnes

Ninth Canadian Edition

Presentation by

Karen A. Blotnicky Mount Saint Vincent University, Halifax, NS

Copyright 2001 by McGraw-Hill Ryerson Limited

Chapter Goals
To gain an understanding of: The meaning of total product and new product Classification of business and consumer products and its relevance to marketing planning Product innovation The product-development process When to add new products to a product line The adoption and diffusion process for products Organizational structures for product planning and development
Copyright 2001 McGraw-Hill Ryerson Limited 9-2

What is a Product?
it is more than physical products; includes services, places, persons, and ideas it is easy to visualize the products of Esso, but more difficult to describe those of the Toronto Symphony, UNICEF, or the Salvation Army some products are sold only to consumers, while others are sold to organizations whether a product is a consumer product or a business product depends on how it is used
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The Total Product

Sellers services Sellers reputation Product quality Physical characteristics of goods

Price

Colour

Brand

Product warranty Design

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Packaging

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Consumer Goods Classes

Consumer products can be classified by the buying behaviour of the consumers: Convenience goods are bought with little time and effort, such as milk, bread, a chocolate bar. Shopping goods are those where extensive comparison is the norm-- cars, furniture, clothes. Specialty goods are those for which consumers have a strong brand preference. BMW, Armani. Unsought goods are those now unknown to the consumer or, if known, undesired.
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Classifying Business Products

raw materials: unprocessed, become part of other manufactured products manufactured parts and materials: processed products that become part of other products installations: major buildings and equipment accessory equipment: used in operations, include computers, desks, tools operating supplies: low value, used by most firms, convenience products for businesses
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Innovation is Required
Products go through life cycles-- you need new ones coming on stream. Profits highest when products new. Consumers more selective: they look carefully at each purchase. Also a little jaded. High failure rates in the 75% range. Leads to new products: Innovative= truly unique Improved, with valuable new benefits Imitative, another me too product.
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Ten World-Class Product Failures

1. Fords Edsel automobile. 2. Duponts Corfam synthetic leather. 3. Polaroids Polavision. 4. United Artists Heavens Gate western movie. 5. RCAs Videodisc. 6. Times TV-Cable Week magazine. 7. IBMs PCjr. 8. New Coke. 9. R.J. Reynolds Premier cigarette. 10. Nutrasweets Simplesse fat substitute.
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New Product Development

companies must be constantly modifying existing products and developing new ones; the marketplace demands it how new is new? most new products are modifications of or extensions to existing ones the introduction of a new product is a strategic decision which should be guided by the companys goals and a new product introduction strategy
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Identify the strategic role of new products, then...

The New Product Development Process

1. Idea generation

2. 3. 4. Screening Business Prototype of ideas analysis development

5. Market Tests

6. Commercialization

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The New Product Development Process

A new product is best developed through a series of six stages: The first two stages provide a focus for generating new-product ideas and a basis for evaluating them. The next three stages deal with ideas and are the least expensive. In their haste, some companies skip stages the most common omission being market tests.
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Criteria for New Products

there must be adequate market demand: this is necessary but not sufficient for success must satisfy key financial criteria must be compatible with environmental standards must fit with the companys marketing structure should also be compatible with production capabilities, satisfy legal requirements, and fit with corporate goals and objectives
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Development of New Product Strategy

Company Goals Product Strategy Examples
Pizza Huts Big New Yorker and Stuffed Crust pies Digital cameras introduced by Sony, Canon, and other firms
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Defend market Introduce addition to share existing produce line/ revise existing product Strengthen Introduce a really reputation as new product - not an innovator just an extension of an existing product
Copyright 2001 McGraw-Hill Ryerson Limited

Adoption-Diffusion Process
different new products are adopted by consumers at different rates the individual consumer goes through certain stages before adopting a new product marketers must be interested in first creating awareness, then interest, then trial, before the consumer is considered an adopter some people are genuine innovators, while others wait and try later; some never adopt
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New Product Adoption and Diffusion

Adoption process: The decisionmaking activity of an individual through which the new product is accepted. Diffusion: The process by which an innovation is spread through a social system over time.

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 awareness: customer is exposed to the product interest: interest and information seeking evaluation: assessment of the advantages and disadvantages of the new product trial: customer tries the product in low-risk situation; may be a sample or test drive adoption: customer decides to buy the product confirmation: customer decides to stay with the product; attempts dissonance reduction
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Stages in the Adoption Process

Adopter Categories
Researchers have identified five categories of individual adopters for new products: Innovators 3% of the market. Early adopters 13% of the market. Early majority 34% of the market. Late majority 34% of the market. Laggards 16% of the market. In addition, some individuals nonadopters never accept the innovation.
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Five Characteristics Affecting Adoption Rate: Example

Evaluation of new safer baseball for youngsters: 1. Relative advantagesuperior to current balls in terms of safety but not tradition. 2. Compatibilitycoincides with cultural values and experiences of parents but not of coaches. 3. Complexityno problem understanding. 4. Trialabilityball can be easily tested. 5. Observabilitycan see a youngster whos hit with the new ball dust off and trot to first base.
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New Product Organization

Companies take a variety of approaches to organizing the new product function: product-planning committees new-product departments cross-functional new venture teams product managers
many larger firms are replacing the product manager with category managers
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