12/3/2021

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9-1
©McGraw-Hill Education.

Eighth Edition

MARKET IN G
TH E CO RE

Developing New
Products and Services Roger A. Kerin
Steven W. H artley

©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.

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LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 9, YOU SHOULD BE ABLE TO:
(1 of 2)

1. Recognize the various terms that pertain to

products and services.
2. Identify the ways in which consumer and
business products and services can be
classified.
3. Describe four unique elements of service.
4. Explain the significance of “newness” in
new products and services as it relates to
the degree of consumer learning involved.

9-3
©McGraw-Hill Education.

LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 9, YOU SHOULD BE ABLE TO:
(2 of 2)

5. Describe the factors contributing to the

success or failure of a new product or
service.
6. Explain the purposes of each step of the
new-product development process.

9-4
©McGraw-Hill Education.

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APPLE: THE WORLD-CLASS

NEW-PRODUCT MACHINE
Successes: Stumbles:
• Apple II (1977) • Apple III (1980)
• Mac (1984) • Lisa (1983)
• iPod (2001) • Newton (1987)
• iPhone (2007) • Mac Portable (1989)
• iPad (2010) • Hockey Puck Mouse
• CarPlay (2014) (1998) Apple iCloud
• Apple Watch (2015) Website

• AirPods (2017) What’s Next?

• HomePod (2018) • An Apple-enabled
iCar?
9-5
©McGraw-Hill Education.

WHAT ARE PRODUCTS AND SERVICES?

A LOOK AT GOODS, SERVICES, AND IDEAS

Products: A good, service, or idea consisting

of a bundle of tangible and intangible attributes
that satisfies consumers’ needs and is received
in exchange for money or something else of
value.

9-6
©McGraw-Hill Education.

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WHAT ARE PRODUCTS AND SERVICES?

A LOOK AT GOODS, SERVICES, AND IDEAS

Products
Services
Goods
1. Nondurable goods
2. Durable goods

9-7
©McGraw-Hill Education.

WHAT ARE PRODUCTS AND SERVICES?

A LOOK AT GOODS, SERVICES, AND IDEAS

Services: Intangible activities or benefits that

an organization provides to satisfy consumers’
needs in exchange for money or something
else of value.

Ideas: idea is a thought that leads to a product

or action, such as a concept for a new
invention or for getting people out to vote

9-8
©McGraw-Hill Education.

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Three Levels of Product

9-9
©McGraw-Hill Education.

WHAT ARE PRODUCTS AND SERVICES?

CLASSIFYING PRODUCTS (1 of 2)

Consumer products are purchased by

consumers.
Types of consumer products:
1. Convenience products
2. Shopping products
3. Specialty products
4. Unsought products

9-10
©McGraw-Hill Education.

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FIGURE 9-1 How a consumer product is classified affects which

products consumers buy and the marketing strategies used.
Type of Consumer Product
Basis of
Convenience Shopping Product Specialty Product Unsought Product
Comparison
Product
Product Toothpaste, cake Cameras, TVs, Rolls-Royce cars, Burial insurance
mix, hand soap, briefcases, airline Rolex watches,
ATM cash tickets heart surgery
withdrawal

Price Relatively Fairly expensive Usually very Varies

inexpensive expensive
Place (distribution) Widespread; many Large number of Very limited Often limited
outlets selective outlets
Promotion Price, availability, Differentiation from Uniqueness of Awareness is
and awareness competitors brand and status essential
stressed stressed stressed
Brand loyalty of Aware of brand but Prefer specific Very brand loyal; Will accept
consumers will accept brands but will will not accept substitutes
substitutes accept substitutes substitutes
Purchase behavior Frequent Infrequent Infrequent Very infrequent
of consumers purchases; little purchases; needs purchases; needs purchases; some
time and effort much comparison extensive search comparison
spent shopping shopping time and decision time shopping

©McGraw-Hill Education.

WHAT ARE PRODUCTS AND SERVICES?

CLASSIFYING PRODUCTS (2 of 2)

Business products for organizations:

• Derived demand
• Components
• Support products
• Installations
• Accessory equipment
• Supplies
• Industrial services

9-12
©McGraw-Hill Education.

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FIGURE 9-2 Services can be classified

as equipment-based or people-based

Access the text alternative for these images. 9-13

©McGraw-Hill Education.

WHAT ARE PRODUCTS AND SERVICES?

CLASSIFYING SERVICES

Delivery by:
• People or equipment
• Business firms or nonprofit
organizations
• Government agencies

9-14
©McGraw-Hill Education.

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THE UNIQUENESS OF SERVICES

THE FOUR I’S OF SERVICES

Services

Four I’s of Services:

• Intangibility
• Inconsistency
• Inseparability
• Inventory

Idle Production Capacity

9-15
©McGraw-Hill Education.

HOW CONSUMERS PURCHASE SERVICES

ASSESSING AND IMPROVING SERVICE QUALITY

Gap Analysis
• Expectations versus Experiences

Dimensions of Service Quality:

1. Reliability Is my flight on time?
2. Tangibility Are the gate, the plane, and the
baggage area clean?
3. Responsiveness Are the flight attendants
willing to answer my questions?

9-16
©McGraw-Hill Education.

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HOW CONSUMERS PURCHASE SERVICES

ASSESSING AND IMPROVING SERVICE QUALITY

Expectations
• Expectations are influenced by word-of-mouth
communications, personal needs, past experiences, and
promotional activities, while actual experiences are
determined by the way an organization delivers its service.
• Research suggest that customers who experience a “service
failure” will increase their satisfaction if the service provider
makes a sincere attempt to address the complaint

9-17
©McGraw-Hill Education.

WHAT ARE PRODUCTS AND SERVICES?

PRODUCT CLASSES, FORMS, ITEMS, LINES, AND MIXES (1 of 2)

Product class (or industry)

Different product forms exist within the

product class (e.g., Ultra Downy fabric
softener can be in liquid, sheets, load
sizes)

9-18
©McGraw-Hill Education.

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WHAT ARE PRODUCTS AND SERVICES?

PRODUCT CLASSES, FORMS, ITEMS, LINES, AND MIXES (2 of 2)

Product item (e.G., Stock keeping unit

(SKU))

Product line – group of items that are

closely related

Product mix – all the product lines

offered
9-19
©McGraw-Hill Education.

– Product line filling: Unilerver đã cải tiến bột giặt OMO của
mình thêm nhiều phiên bản: OMO trắng sáng, OMO hương ngàn
hoa, OMO tẩy trắng

9-20
©McGraw-Hill Education.

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– Product line stretching: chất lượng thấp, giá thấp, doanh

nghiệp có thể vươn lên thị trường phía trên với chất lượng cao, giá cao

9-21
©McGraw-Hill Education.

Crapola Granola
What is its product class, form, item, line, and/or mix?

Crapola Crapola
Website Video

9-22
©McGraw-Hill Education.

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NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL
WHAT IS A NEW PRODUCT? (1 of 3)

Newness: compared to existing products

1. Product is new if functionally different

from existing products.
2. Revolutionary newness can create new
industries (example: smartphones).
Xbox One
Video

9-23
©McGraw-Hill Education.

MARKETING MATTERS
Much of a Good Thing:
Feature Bloat & Fatigue in New Products

Feature bloat: Unnecessary features or

functions

Feature fatigue: Consumers choose overly

complex products

9-24
©McGraw-Hill Education.

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9-25
©McGraw-Hill Education.

NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL
WHAT IS A NEW PRODUCT? (2 of 3)

Newness: the consumer’s

perspective

1. Continuous innovation
2. Dynamically continuous innovation
3. Discontinuous innovation

9-26
©McGraw-Hill Education.

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FIGURE 9-3 The degree of “newness” in a new product

affects the amount of learning effort consumers exert
to use the product.

Access the text alternative for these images.

©McGraw-Hill Education.

NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL
WHAT IS A NEW PRODUCT? (3 of 3)

Newness in legal terms: “New” term is

limited to 6 months.

Newness from the organization’s

perspective
• Product line extension
• Jump in innovation
• Brand extension
9-28
©McGraw-Hill Education.

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NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL
WHY PRODUCTS AND SERVICES SUCCEED OR FAIL (1 of 4)

Protocol
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 to satisfy
consumers.
9-29
©McGraw-Hill Education.

NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL
WHY PRODUCTS AND SERVICES SUCCEED OR FAIL (1 of 4)

Protocol

It is difficult to produce a successful new

product.
• Most consumers buy the same 150 items
consistently.
• Less than 3% of new CPG exceed year 1 sales
of $50M.

9-30
©McGraw-Hill Education.

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NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL
WHY PRODUCTS AND SERVICES SUCCEED OR FAIL (2 of 4)

Marketing reasons for new-product

failures
1. Insignificant point of difference
2. Incomplete market and product
protocol before product
development starts
3. Not satisfying customer needs on
critical factors
4. Bad timing
9-31
©McGraw-Hill Education.

NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL
WHY PRODUCTS AND SERVICES SUCCEED OR FAIL (3 of 4)

Marketing reasons for new-product

failures (cont.)
5. No economical access to buyers
6. Poor execution of the marketing mix
7. Too little market attractiveness
8. Poor product quality

9-32
©McGraw-Hill Education.

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NEW PRODUCTS AND WHY THEY

SUCCEED OR FAIL
WHY PRODUCTS AND SERVICES SUCCEED OR FAIL (4 of 4)

Organizational inertia in new-product failures:

• Encountering “groupthink” in task force
and committee meetings
• Avoiding the “not-invented-here” problem
• Open innovation – practices that
encourage the use of external and
internal ideas

9-33
©McGraw-Hill Education.

APPLYING MARKETING METRICS

Which States are Underperforming?

Annual Percent Change in Unit Volume by State

(
é 2018 Sales – 2017 Sales ´ 100 ù
Annual % Sales Change = ê ú )
êë 2017 Sales úû

Change in Growth:

< 0%

0 to 10%

> 10%

9-34
Access the text alternative for these images.
©McGraw-Hill Education.

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FIGURE 9-4 Seven stages in the new-product

process leading to success

Access the text alternative for these images.

©McGraw-Hill Education.

THE NEW-PRODUCT PROCESS

STAGE 1: NEW-PRODUCT STRATEGY DEVELOPMENT

New-product development process

New-product strategy development

• SWOT analysis
• Environmental scanning
• Protocol & strategic role defined
• Disruptive innovation can occur
• Service development difficult

9-36
©McGraw-Hill Education.

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THE NEW-PRODUCT PROCESS

STAGE 2: IDEA GENERATION (1 of 3)

Idea generation
• Open innovation
Life is Good
• Employee and co-
worker
suggestions
• Customer and
Tide
supplier Pods Ad
suggestions
• Crowdsourcing

9-37
©McGraw-Hill Education.

THE NEW-PRODUCT PROCESS

STAGE 2: IDEA GENERATION (2 of 3)

Research and Development Laboratories

• Industrial Design
• Outside Labs: IDEO

IDEO
Website

9-38
©McGraw-Hill Education.

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THE NEW-PRODUCT PROCESS

STAGE 2: IDEA GENERATION (3 of 3)

Competitive products

Smaller nontraditional
firms, universities, and
inventors

Crowdfunding
Ex: Pebble
Smartwatch
9-39
©McGraw-Hill Education.

THE NEW-PRODUCT PROCESS

STAGE 3: SCREENING AND EVALUATION

Screening and evaluation

Internal approach
• Customer experience management
(CEM)

External approach
• Concept tests
9-40
©McGraw-Hill Education.

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MARKETING MATTERS
Was the Google Glass Half Full or Half Empty?

Augmented reality glasses:

• 8,000 prototypes sold to “Glass Explorers”
for $1,500 (2013)
• Incomplete product testing
• “Glassholes”
• Withdrawn from market (2015)
• New version – Glass enterprise edition
(2018) – being tested for use by workers
Google
Glass
9-41
©McGraw-Hill Education.

THE NEW-PRODUCT PROCESS

STAGE 4: BUSINESS ANALYSIS

Business analysis

• Prototype – full-scale model

• Business fit of new product
• Financial projections

9-42
©McGraw-Hill Education.

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THE NEW-PRODUCT PROCESS

STAGE 5: DEVELOPMENT

Development
• Turns ideas into prototypes
• Results in demonstrable product
• Lab and consumer tests
• Ex: Waymo’s driverless car

9-43
©McGraw-Hill Education.

THE NEW-PRODUCT PROCESS

STAGE 6: MARKET TESTING

Market testing
• Standard test markets
• Controlled test markets
• Simulated test markets (STMs)

9-44
©McGraw-Hill Education.

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THE NEW-PRODUCT PROCESS

STAGE 7: COMMERCIALIZATION

Commercialization

The Boeing 787 Dreamliner

experience
• Technical problems
Burger King french fries: The
complexity of commercialization
• Too complicated to get right
9-45
©McGraw-Hill Education.

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