1 Part 4 Product Dynamics Chapter 23

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Part 4 Product Dynamics Chapter 23 Developing New Products 2

Chapter Objectives ¾ Explain why marketers use a product development process. ¾ Summarize the eight steps in the new-product development process. 3

Marketing Terms ¾ creativity ¾ competitive advantage ¾ prototype ¾ trial run ¾ test marketing 4

What makes a product “new”? 5

What Is a “New” Product? ¾ In one sense, there is nothing new under the sun ¾ Practically speaking, a new product is one that differs in some way from existing products ¾ Many new-product developers take an existing product and change one or two things in it (Continued) 6

What Is a “New” Product? ¾ Ways to make existing products new ¤ repackage ¤ make minor variations ¤ give the product a new design ¤ use new technology Describe some new products. 7

Risk of New Products ¾ Developing and selling a new product is risky ¾ Over 75% of new products fail ¾ Famous new-product failures ¤ Ford Edsel, New Coke, and Mc. Donald’s Arch Deluxe ¾ To reduce the risk of failure ¤ many businesses use an eight-step process 8

New-Product Process 1. 2. 3. 4. 5. 6. 7. 8. Idea generation Idea screening Business analysis Product design Production Test marketing Introduction Evaluation 9

Idea Generation ¾ Goal: to create a large list of ideas from which to choose ¾ Product ideas usually result from ¤ observation ¤ research ¤ creative thinking How would you develop ideas for new products? 10

Idea Generation: Observation ¾ Observe customers, friends, and colleagues to find unfilled customer needs ¾ Observe and listen to customers ¾ Observe your competition 11

Idea Generation: Research ¾ Conduct research by ¤ analyzing your business records ¤ surveying your customers ¤ reading articles on trends and newproduct development ¤ keeping up with technology and inventions ¾ Hire a marketing research firm that specializes in trend research 12

Idea Generation: Creative Thinking ¾ Creativity ¤ ability to produce something new ¾ Creativity is a talent ¾ Creativity is also a set of skills that can be learned or developed (Continued) 13

Idea Generation: Creative Thinking ¾ Techniques used to develop creativity ¤ brainstorming ¤ learning ¤ questioning ¤ journaling ¤ participating in new activities ¤ taking a different point-of-view What could you do to improve your creativity? 14

Idea Screening ¾ Goal: to choose the best idea with the most potential for profits ¾ Review all ideas ¾ For each one, ask ¤ Will our customers buy it? ¤ Can our company produce and sell it profitably? (Continued) 15

Idea Screening ¾ Do more marketing research ¾ Try out product ideas on a sample of potential customers 16

Business Analysis ¾ Goal: to make sure the new-product idea can be done by the company ¾ A new product should be appropriate to the company’s ¤ image ¤ goals ¤ strengths ¤ resources (Continued) 17

Business Analysis ¾ Consider your company’s image ¤ Does the new product fit in with the other products? ¾ Consider your company’s goals ¤ Does the new product fit our goals? ¤ Does the new product provide a competitive advantage? – some feature that makes our product more desirable than competing products (Continued) 18

Business Analysis ¾ Consider your company’s strengths ¤ Do we have the expertise to create the new product? ¤ If we don’t have the expertise, can we buy the expertise? ¾ Consider your company’s resources ¤ Can we afford to produce and market the new product? 19

Product Design ¾ Goal: convert the product idea into reality ¾ Goods and services go through slightly different product design processes 20

Product Design: Goods ¾ For tangible goods, the first step is usually to develop a prototype ¤a working model of the actual product ¾ Designers experiment with the prototype to see if it performs as expected ¾ Marketers try the prototype on potential customers to see if they like and will buy the new product (Continued) 21

Product Design: Goods ¾ For a good, the brand name, logo, slogan, and packaging ¤ may be developed at this time Photo by Steve Olewinski 22

Product Design: Services and Ideas ¾ Product design for a service ¤ planning what will be included in the service ¤ training the service providers ¤ creating the space where the service will be provided including equipping and decorating the space ¤ setting up the system for delivery and payment (Continued) 23

Product Design: Services and Ideas ¾ For a service, the equivalent of the prototype is the trial run ¤ like a dress rehearsal for a play 24

Production ¾ Goal: to make products in large enough quantities to sell ¾ For goods, the production step consists of ¤ deciding how many to make ¤ manufacturing the good in large quantities (Continued) 25

Production ¾ Problems can occur during production ¤ difficulties getting raw materials ¤ machines break down ¤ final goods do not work as expected ¾ These problems must be solved (Continued) 26

Production ¾ During the production step ¤ the rest of the marketing mix—place, price, and promotion—is finalized ¾ For services and ideas, production is inseparable from the product itself ¤ so, the production step is part of product introduction 27

Test Marketing ¾ Goal: to see if the market will buy the product ¾ What if the market does not like and buy the product? ¾ To try to avoid this risk, companies use test marketing ¤ introducing the new product to a small portion of the target market (Continued) 28

Test Marketing ¾ Test marketing ¤ tests a single variable or all variables of the marketing mix ¤ is usually too expensive for smaller companies ¤ has risks – your competitors might see your product and copy it 29

Introduction ¾ Goal: to make a big splash and get customers to buy the product ¾ Introduction ¤ when the product is first presented to the market ¤ also called commercialization ¾ Promotion is critical and often starts before the product is actually available (Continued) 30

Courtesy of National Restaurant Association ¾ New products are often introduced at trade shows 31

Evaluation ¾ Goal: to decide what to do next ¾ After product starts selling, ask ¤ Should we continue to produce this product? ¤ Should we make any changes to it? ¤ Should we change any part of the marketing mix, such as promotion, distribution, or price? ¤ Should we expand the market? 32

Review ¾ Describe the eight-step process used to develop new products. ¾ From where do product ideas come? ¾ Describe techniques used to develop creativity. ¾ How can marketers test market a product? 33

Glossary Back ¾ competitive advantage. Aspect of a product that is better than the competitors’ products. ¾ creativity. Ability to produce something new. ¾ prototype. Working model of the actual product. (Continued) 34

Glossary Back ¾ test marketing. Introducing a new product to a small portion of the target market, for example one city. ¾ trial run. Trying out a service on a few selected customers to make sure that everything runs smoothly. 35