CHAPTER
DEVELOPING
NEW PRODUCTS
AND SERVICES
Product Items, Lines, and Mixes
Product Item
(SKU)
A specific version of an
organization’s products.
Each has a unique number and bar code
Product Line
A group of closely-related
product items.
Product Mix
All products that an
organization sells.
Classifying Products
 Type of User
• Consumer Goods
• Business Goods
 Degree of Tangibility
• Nondurable Good-used up in a few uses
• Durable Good-lasts over many uses
Examples??
• Services
The Characteristics of Services
Intangibility
Services that cannot be touched,
seen, tasted, heard, or felt in the
same manner as goods.
Inseparability
A characteristic of services that
allows them to be produced and
consumed simultaneously.
Heterogeneity
A characteristic of services that
makes them less standardized
and uniform than goods.
Perishability
A characteristics of services that
prevents them from being stored,
warehoused, or inventoried.
THE VARIATIONS OF PRODUCTS
 The Four I’s of Services
 Intangibility
 Inseparability
 Inconsistency
 Inventory
• Idle Production Capacitylike stock out costs and holding costs for goods
Can be reduced by using commission and part time workers
CLASSIFYING GOODS AND SERVICES
Convenience
Product
A relatively inexpensive item that merits
little shopping effort.
Shopping
Product
A product that requires comparison
shopping, because it is usually more
expensive and found in fewer stores.
Specialty
Product
A particular item that consumers
search extensively for and are reluctant to
accept substitutes.
Unsought
Product
A product unknown to the potential buyer or
a known product that the buyer does not
actively seek.
Classification of consumer goods
Why new-product development can be a
dice roll: some forecasts
What Is A New Product
 Functionally Different from Existing Products
 FTC: Newness = 6 Months or less After
Regular Distribution
 Company: Simply Anything Different
FIGURE 10-D What it takes to launch one
commercially successful new product
Reasons for New Product Failures
• Bad Timing
• Too Little Market Attractiveness
• Poor Execution of the Marketing Mix:
Name, Price, Promotion, and Distribution
• No Access to Buyers
• Insignificant Point of Difference
• Poor Product Quality
• Insensitivity to Customer Needs on Critical Factors
Why Did These Products Fail?
Why did this new product fail?
Stages in the New Development Process
Strategic roles of most successful new products
THE NEW-PRODUCT PROCESSIdea Generation
 Customer and Supplier Suggestions
 Employee and Co-Worker Suggestions
 Research and Development Breakthroughs
 Competitive Products
THE NEW-PRODUCT PROCESSScreening and Evaluation
The first filter in the product
development process, which
eliminates ideas that are inconsistent
with the organization’s new-product
strategy or are inappropriate for some
other reason.
THE NEW-PRODUCT PROCESSBusiness Analysis
• if positive, build a prototype
Demand
Considerations
in
Business
Analysis Stage
Cost
Sales
Profitability
THE NEW-PRODUCT PROCESSDevelopment
 “Failure Analysis”
 Safety Tests
Marketing strategy
Packaging, branding, labeling
Manufacturing feasibility
Final government approvals if
needed
THE NEW-PRODUCT PROCESSMarketing
Test
The limited introduction of a product
and a marketing program to determine
the reactions of potential customers
in a market situation.
When Test Markets Don’t Work
Limited time to market
Service nature of the item
Time to see product benefit is long
 Number of units produced is small
Six important U.S. test markets
“demographics winner”: Wichita Falls, Texas,
metropolitan statistical area
THE NEW-PRODUCT PROCESSCommercialization
Most expensive stage
 Ramp Up and Regional Rollouts
• Product Positioning is marketing’s job here
 Speed as a Factor in New-Product Success
• Time to Market- important high tech items
• Fast Prototyping – do it, try it, fix it
• Parallel Development – Gantt chart usage
To Review: The New Product Process
Product
A product is a good, service, or idea
consisting of a bundle of tangible and
intangible attributes that satisfies
consumers and is received in exchange
for money or some other unit of value.
Product Line
A product line is a group of products that
are closely related because they satisfy a
class of needs, are used together, are sold
to the same customer group, are
distributed through the same type of
outlets, or fall within a given price range.
Product Mix
The product mix is the number of
product lines offered by a company.
Consumer Goods
Consumer goods are products purchased
by the ultimate consumer.
Business Goods
Business goods are products that assist
directly or indirectly in providing
products for resale. Also called as B2B
goods, industrial goods, or organizational
goods.
Services
Services are intangible activities or
benefits that an organization provides to
consumers in exchange for money or
something else of value.
Idle Production Capacity
Idle production capacity occurs when
the service provider is available but there
is no demand.
New-Product Process
The new-product process consists of
seven stages a firm goes through to
identify business opportunities and
convert them to a salable good or service.