Developing and Managing

1. Developing and Managing Products and Services Chapter 8

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 Winnipeg Symphony Orchestra, 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 on how it is used

3. The Total Product Product quality Physical characteristics of goods Seller’s services Seller’s reputation Price Colour Brand Product warranty Packaging Design

4. Consumer Goods Classes Consumer products can be classified by the buying behaviour of the consumers: • Convenience goodsare bought with little time and effort, such as milk, bread, a chocolate bar. • Shopping goodsare those where extensive comparison is the norm-- cars, furniture, clothes. • Specialty goodsare those for which consumers have a strong brand preference. BMW, Armani. • Unsought goodsare those now unknown to the consumer or, if known, undesired.

5. Classifying Business Products • raw materials: unprocessed, become part 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 most firms, convenience products for businesses

6. New-Product Development Strategy • New-product development: • The development of original products, improvements, modifications, and new brands through the firm’s product-development efforts • New product innovation is expensive and risky • Estimated 80% of all new products fail or dramatically underperform

7. 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

8. New-Product Development Process

9. The New Product Development Process Identify the strategic role of new products, then... 1. Idea generation 2. Screening of ideas 3. Business analysis 4. Prototype development 5. Market Tests 6. Commer- cialization

10. New Product Development

11. New-Product Development Process • Idea generation: • Internal sources: • Company employees at all levels • External sources: • Customers • Competitors • Distributors and suppliers • Others (including trade magazines and shows, advertising agencies, marketing research firms, laboratories, and inventors)

12. New-Product Development Process • Idea screening: • Process used to spot good ideas and drop poor ones • Describe product or service, target market, and competition • Estimate market size, price, development time and costs, manufacturing costs, rate of return • Evaluate new-product ideas against a set of company criteria

13. New-Product Development Process • Concept development and testing: • Product concept: • Detailed version of the new-product idea stated in meaningful consumer terms • Concept testing: • Testing new-product concepts with groups of potential consumers to find out if the concepts have strong consumer appeal

14. New-Product Development Process • Marketing strategy development: • Involves designing an initial marketing strategy and a three part marketing strategy statement • Describe the target market, planned value proposition, sales, market share, and profit goals • Outline the product’s planned price, distribution, and marketing budget • Describe the planned long-run sales and profit goals, marketing mix strategy

15. New-Product Development Process • Business analysis: • Review of the sales, costs, and profit projections to assess fit with company objectives • If results are positive, project moves to the product development phase

16. New-Product Development Process • Product development: • Develops concept into a physical product • Calls for a large investment • Prototypes are developed and tested • Prototypes must have required functional features and convey psychological characteristics

17. New-Product Development Process • Test-marketing: • Product and marketing program are introduced into a realistic market setting • Not needed for all products • Provides marketing experience before going to the expense of full introduction • Commercialization: • Full-scale introduction of the product into the market

18. Managing New-Product Development • Customer centered approach: • Focuses on solving customer problems and offers compelling customer value proposition • Team-based approach: • Departments work together, overlapping steps to save time and increase effectiveness • Systematic approach: • Innovation management systems collect, review, evaluate, manage new-product ideas

19. 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 managers

20. Ten World-Class Product Failures 1.Ford’s Edsel automobile. 2. Dupont’s Corfam synthetic leather. 3. Polaroid’s Polavision. 4. 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.

21. Product Life Cycle

22. Product and Service Decisions • Decisions about individual products involve: • Product attributes such as quality, features, style and design • Packaging (bi-lingual in Canada) • Labeling (identify, describes, and promotes brand) • Product support services (customer phone or email)

23. Product and Service Decisions • Decisions about product lines involve: • Product line length • Line filling or line stretching • Product mix has four dimensions: • Width • Length • Depth • Consistency

24. Services Marketing • Services are the most important industry in Canada’s economy and includes: • Government services, hospitals, military, police, Canada Post, schools, not-for-profit organizations • Business services segment (for-profit companies) such as banks, airlines, hotels, real-estate firms

25. Services Marketing

26. The Service-profit chain

27. Services Marketing • Service marketing faces three major marketing tasks, to increase: • Service differentiation • Service quality • Service productivity