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Chapter 9Product Planning and
Development
Copyright 2001 by McGraw-Hill Ryerson Limited
SommersSommers BarnesBarnesNinth Canadian EditionNinth Canadian Edition
Presentation byPresentation by
Karen A. BlotnickyKaren A. Blotnicky
Mount Saint Vincent University, Halifax, NSMount Saint Vincent University, Halifax, NS
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Copyright 2001 McGraw-Hill Ryerson Limited 9 - 2
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 marketingplanning
Product innovation
The product-development process
When to add new products to a product line
The adoption and diffusion process forproducts
Organizational structures for productplanning and development
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What is a Product?
it is more than physical products;includes services, places, persons, andideas
it is easy to visualize the products ofEsso, but more difficult to describethose of the Toronto Symphony,UNICEF, or the Salvation Army
some products are sold only toconsumers, while others are sold toorganizations
whether a product is a consumer
product or a business product depends
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Sellersservices
Sellers
services
Product
quality
Product
quality Physical
characteristicsof goods
Physical
characteristicsof goods
Price
Price
Brand
Brand
Design
Design
Packaging
PackagingProduct
warranty
Productwarranty
Sellers
reputation
Sellers
reputation
Colour
Colour
The Total Product
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Consumer GoodsClasses
Consumer products can be classified by thebuying behaviour of the consumers:
Convenience goodsConvenience goods are bought withlittle time and effort, such as milk, bread,
a chocolate bar. Shopping goodsShopping goods are those where
extensive comparison is the norm-- cars,furniture, clothes.
Specialty goodsSpecialty goods are those for whichconsumers have a strong brandpreference. BMW, Armani.
Unsought goodsUnsought goods are those now
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Classifying BusinessProducts
raw materialsraw materials: unprocessed, become partof other manufactured products
manufactured parts and materials:manufactured parts and materials:
processed products that become part ofother products
installations:installations: major buildings andequipment
accessory equipment:accessory equipment: used in operations,include computers, desks, tools
operating suppliesoperating supplies: low value, used by
most firms, convenience products for
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Innovation isRequired
Products go through life cycles-- youneed new ones coming on stream.
Profits highest when products new.
Consumers more selective: they lookcarefully 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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1.Fords Edsel automobile.2. Duponts Corfam synthetic leather.
3. Polaroids Polavision.
4. United Artists Heavens Gate westernmovie.
5. RCAs Videodisc.
6. Times TV-Cable Weekmagazine.
7. IBMs PCjr.8. New Coke.
9. R.J. Reynolds Premier cigarette.
10. Nutrasweets Simplesse fat substitute.
Ten World-ClassProduct Failures
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New ProductDevelopment companies must be constantly
modifying existing products anddeveloping new ones; the marketplace
demands it how new is new? most new productsare modifications of or extensions toexisting ones
the introduction of a new product is astrategic decision which should beguided by the companys goals and a
new product introduction strategy
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Identify
the strategic
role of newproducts,
then...
Identify
the strategic
role of newproducts,
then...
1.
Idea
generation
1.
Idea
generation
2.
Screening
of ideas
2.
Screening
of ideas
3.
Business
analysis
3.
Business
analysis
4.
Prototype
development
4.
Prototype
development
5.
Market
Tests
5.
Market
Tests
6.
Commer-
cialization
6.
Commer-
cialization
The New ProductDevelopment Process
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The New ProductDevelopment Process
A new product is best developedthrough a series of six stages:The first two stages provide a
focus for generating new-productideas and a basis for evaluatingthem.
The next three stages deal withideas and are the leastexpensive.
In their haste, some companies
skip stages the most common9-7
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Criteria forNew Products there must be adequate market
demand: this is necessary but notsufficient for success
must satisfy key financial criteria must be compatible with environmentalstandards
must fit with the companys marketing
structure should also be compatible with
production capabilities, satisfy legalrequirements, and fit with corporategoals and objectives
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Development of NewProduct Strategy
CompanyGoals
ProductStrategy
Examples
Defend market
share
Introduce addition to
existing produce line/revise existingproduct
Pizza Huts Big
New Yorker andStuffed Crustpies
Strengthen
reputation as aninnovator
Introduce a really
new product - not justan extension of anexisting product
Digital cameras
introduced bySony, Canon, andother firms
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Adoption-DiffusionProcess
different new products are adopted byconsumers at different rates
the individual consumer goes through
certain stages before adopting a newproduct
marketers must be interested in firstcreating awareness, then interest, thentrial, before the consumer is consideredan adopter
some people are genuine innovators,
while others wait and try later; some
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New Product Adoptionand Diffusion
Adoption process:Adoption process: Thedecision-making activity ofan
individual through which thenew product is accepted.
Diffusion:Diffusion: The process bywhich an innovation is spreadthrough a social system overtime.
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Stages in theAdoption Process
awareness:awareness: customer is exposed to theproduct
interest:interest: interest and informationseeking
evaluation:evaluation: assessment of theadvantages and disadvantages of thenew product
trial:trial: customer tries the product in low-risk situation; may be a sample or testdrive
adoption:adoption: customer decides to buy the
product
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Adopter Categories
Researchers have identified fivecategories of individual adoptersfor new products:
Innovators 3% of the market. Early adopters 13% of the
market.
Early majority 34% of themarket.
Late majority 34% of themarket.
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Evaluation of new safer baseball foryoungsters:
1. Relative advantagesuperior to
current balls in terms of safety but nottradition.
2. Compatibilitycoincides with culturalvalues and experiences of parents but
not of coaches.3. Complexityno problem
understanding.
4. Trialabilityball can be easily tested.
5. Observabilitycan see a youngster
Five Characteristics Affecting
Adoption Rate: Example
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New ProductOrganization
Companies take a variety ofapproaches
to organizing the new product
function: product-planning committees
new-product departments
cross-functional new ventureteams
product managers many larger firms are replacing the
product manager with category