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Product Planning and Development

Product Planning and Development

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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
Copyright © 2001 McGraw-Hill Ryerson Limited

9-3

The Total Product
Seller’s Seller’s services services Seller’s Seller’s reputation reputation Product Product quality quality Physical Physical characteristics characteristics of goods of goods Price Price

Colour Colour Product Product warranty warranty Design Design
Copyright © 2001 McGraw-Hill Ryerson Limited

Brand Brand

Packaging Packaging

9-4

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
Copyright © 2001 McGraw-Hill Ryerson Limited 9-5

Classifying Business Products
• raw materials: unprocessed, become part materials 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 supplies most firms, convenience products for
Copyright © 2001 McGraw-Hill Ryerson Limited 9-6

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.
Copyright © 2001 McGraw-Hill Ryerson Limited

9-7

Ten World-Class Product Failures
1. 2. 3. 4. Ford’s Edsel automobile. Dupont’s Corfam synthetic leather. Polaroid’s Polavision. United Artist’s Heaven’s Gate western movie. 5. RCA’s Videodisc. 6. Time’s TV-Cable Week magazine. 7. IBM’s PCjr. 8. New Coke. 9. R.J. Reynolds’ Premier cigarette. 10. Nutrasweet’s Simplesse fat substitute.
Copyright © 2001 McGraw-Hill Ryerson Limited

9-8

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 company’s goals and a new product introduction strategy
Copyright © 2001 McGraw-Hill Ryerson Limited 9-9

The New Product Identify Identify the strategic Development Process the strategic
role of new role of new products, products, then... then...

1. 2. 3. 4. 1. 2. 3. 4. Idea Screening Business Prototype Idea Screening Business Prototype generation generation of ideas of ideas analysis development analysis development

5. 5. Market Market Tests Tests

6. 6. CommerCommercialization cialization

Copyright © 2001 McGraw-Hill Ryerson Limited

9 - 10

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 9-7
Copyright © 2001 McGraw-Hill Ryerson Limited

9 - 11

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 company’s marketing structure • should also be compatible with production capabilities, satisfy legal requirements, and fit with corporate goals and objectives
Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 12

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

9 - 13

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
Copyright © 2001 McGraw-Hill Ryerson Limited

9 - 14

New Product Adoption and Diffusion
• Adoption process: The decision-making 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.
Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 15

• 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 lowrisk situation; may be a sample or test drive • adoption: customer decides to buy the product
Copyright © 2001 McGraw-Hill Ryerson Limited

Stages in the Adoption Process

9 - 16

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.
Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 17

Five Characteristics Affecting Adoption Rate: Example
Evaluation of new safer baseball for youngsters: 1. Relative advantage—superior to current balls in terms of safety but not tradition. 2. Compatibility—coincides with cultural values and experiences of parents but not of coaches. 3. Complexity—no problem understanding. 4. Trialability—ball can be easily tested. 5. Observability—can see a youngster
Copyright © 2001 McGraw-Hill Ryerson Limited

9 - 18

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
Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 19

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