This document provides an overview of chapter 9 from the marketing textbook "Marketing: The Core". It discusses key concepts around products, services, and the new product development process. The learning objectives cover recognizing terms for products and services, classifying consumer and business products/services, describing elements of services, explaining new product "newness", and outlining the new product development process. Key sections define products and services, classify consumer products, outline the uniqueness of services, and describe the 7 stages of new product development including strategy, idea generation, screening, business analysis, development, market testing, and commercialization.

1. ©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.
Developing New
Products and Services Roger A. Kerin
Steven W. H artley
MARKETING
THE CORE
Eighth Edition
CHAPTER
9

2. ©McGraw-Hill Education.
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.
9-2

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.
9-3

4. ©McGraw-Hill Education.
APPLE: THE WORLD-CLASS
NEW-PRODUCT MACHINE
Successes:
• Apple II (1977)
• Mac (1984)
• iPod (2001)
• iPhone (2007)
• iPad (2010)
• CarPlay (2014)
• Apple Watch (2015)
• AirPods (2017)
• HomePod (2018)
Stumbles:
• Apple III (1980)
• Lisa (1983)
• Newton (1987)
• Mac Portable (1989)
• Hockey Puck Mouse
(1998)
What’s Next?
• An Apple-enabled
iCar?
Apple iCloud
Website
9-4

5. ©McGraw-Hill Education.
WHAT ARE PRODUCTS AND SERVICES?
A LOOK AT GOODS, SERVICES, AND IDEAS
Products
Services
Goods
1. Nondurable goods
2. Durable goods
Ideas
9-5

6. ©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
9-6

7. ©McGraw-Hill Education.
FIGURE 9-1 How a consumer product is classified affects which
products consumers buy and the marketing strategies used.
Basis of
Comparison
Type of Consumer Product
Convenience
Product
Shopping Product Specialty Product Unsought Product
Product Toothpaste, cake
mix, hand soap,
ATM cash
withdrawal
Cameras, TVs,
briefcases, airline
tickets
Rolls-Royce cars,
Rolex watches,
heart surgery
Burial insurance,
thesaurus
Price Relatively
inexpensive
Fairly expensive Usually very
expensive
Varies
Place (distribution) Widespread; many
outlets
Large number of
selective outlets
Very limited Often limited
Promotion Price, availability,
and awareness
stressed
Differentiation from
competitors
stressed
Uniqueness of
brand and status
stressed
Awareness is
essential
Brand loyalty of
consumers
Aware of brand but
will accept
substitutes
Prefer specific
brands but will
accept substitutes
Very brand loyal;
will not accept
substitutes
Will accept
substitutes
Purchase behavior
of consumers
Frequent
purchases; little
time and effort
spent shopping
Infrequent
purchases; needs
much comparison
shopping time
Infrequent
purchases; needs
extensive search
and decision time
Very infrequent
purchases; some
comparison
shopping

8. ©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
9-8

9. ©McGraw-Hill Education.
Access the text alternative for these images.
FIGURE 9-2 Services can be classified
as equipment-based or people-based
9-9

10. ©McGraw-Hill Education.
WHAT ARE PRODUCTS AND SERVICES?
CLASSIFYING SERVICES
Delivery by:
• People or equipment
• Business firms or nonprofit
organizations
• Government agencies
9-10
©PSL Images/Alamy Stock Photo

11. ©McGraw-Hill Education.
THE UNIQUENESS OF SERVICES
THE FOUR I’S OF SERVICES
Services
Four I’s of Services:
• Intangibility
• Inconsistency
• Inseparability
• Inventory
Idle Production Capacity
9-11

12. ©McGraw-Hill Education.
HOW CONSUMERS PURCHASE SERVICES
ASSESSING AND IMPROVING SERVICE QUALITY
Gap Analysis
• Expectations versus Experiences
Dimensions of Service Quality:
1. Reliability
2. Tangibility
3. Responsiveness
9-12

13. ©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)
9-13

14. ©McGraw-Hill Education.
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
9-14

15. ©McGraw-Hill Education.
Crapola Granola
What is its product class, form, item, line, and/or mix?
Crapola
Website
Crapola
Video
9-15

16. ©McGraw-Hill Education.
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
9-16

17. ©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
9-17

18. ©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
9-18

19. ©McGraw-Hill Education.
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.

20. ©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
9-20

21. ©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.
9-21

22. ©McGraw-Hill Education.
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
9-22
©Suzanne Kreiter/The Boston Globe via Getty Images; ©David Paul Morris/Bloomberg via Getty Images

23. ©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
9-23
©B Christopher/Alamy Stock Photo; ©Patrick Farrell/KRT/Newscom

24. ©McGraw-Hill Education.
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
9-24

25. ©McGraw-Hill Education.
APPLYING MARKETING METRICS
Which States are Underperforming?
Annual Percent Change in Unit Volume by State
Annual % Sales Change =
2018 Sales – 2017 Sales
( ) ´ 100
2017 Sales
é
ë
ê
ê
ù
û
ú
ú
> 10%
0 to 10%
< 0%
Change in Growth:
Access the text alternative for these images.
9-25

26. ©McGraw-Hill Education.
FIGURE 9-4 Seven stages in the new-product
process leading to success
Access the text alternative for these images.

27. ©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
9-27

28. ©McGraw-Hill Education.
THE NEW-PRODUCT PROCESS
STAGE 2: IDEA GENERATION (1 of 3)
Idea generation
• Open innovation
• Employee and co-
worker
suggestions
• Customer and
supplier
suggestions
• Crowdsourcing
Life is Good
Tide
Pods Ad
9-28
©Michael Dwyer/AP Images

29. ©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
9-29

30. ©McGraw-Hill Education.
THE NEW-PRODUCT PROCESS
STAGE 2: IDEA GENERATION (3 of 3)
Competitive products
Smaller nontraditional
firms, universities, and
inventors
Crowdfunding
Ex: Pebble
Smartwatch
9-30
©John Ziomek/Courier- Post via USA TODAY NETWORK; ©Neil Godwin/T3 Magazine via Getty Images

31. ©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
9-31

32. ©McGraw-Hill Education.
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
9-32
©Seth Wenig/AP Images

33. ©McGraw-Hill Education.
THE NEW-PRODUCT PROCESS
STAGE 4: BUSINESS ANALYSIS
Business analysis
• Prototype – full-scale model
• Business fit of new product
• Financial projections
9-33

34. ©McGraw-Hill Education.
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
9-34

35. ©McGraw-Hill Education.
THE NEW-PRODUCT PROCESS
STAGE 6: MARKET TESTING
Market testing
• Standard test markets
• Controlled test markets
• Simulated test markets (STMs)
• When test markets don’t work
9-35

36. ©McGraw-Hill Education.
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
9-36
©KiyoshiOta/Bloomberg via Getty Images

37. ©McGraw-Hill Education.
Product
A product is 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.
9-37

38. ©McGraw-Hill Education.
Services
Services are the intangible activities or
benefits that an organization provides to
satisfy consumers’needs in exchange for
money or something else of value.
9-38

39. ©McGraw-Hill Education.
Consumer Products
Consumer products are products
purchased by the ultimate consumer.
9-39

40. ©McGraw-Hill Education.
Convenience Products
Convenience products are items that the
consumer purchases frequently,
conveniently, and with a minimum of
shopping effort.
9-40

41. ©McGraw-Hill Education.
Shopping Products
Shopping products are items for which the
consumer compares several alternatives on
criteria such as price, quality, or style.
9-41

42. ©McGraw-Hill Education.
Specialty Products
Specialty products are items that a
consumer makes a special effort to search
out and buy.
9-42

43. ©McGraw-Hill Education.
Unsought Products
Unsought products are items that the
consumer either does not know about or
knows about but does not initially want.
9-43

44. ©McGraw-Hill Education.
Business Products
Business products are products
organizations buy that assist in providing
other products for resale. Also called B2B
products or industrial products.
9-44

45. ©McGraw-Hill Education.
Product Item
A product item is a specific product that
has a unique brand, size, or price.
9-45

46. ©McGraw-Hill Education.
Product Line
A product line is a group of product or
service items 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 outlets, or fall within a given price
range.
9-46

47. ©McGraw-Hill Education.
Product Mix
A product mix consists of all of the product
lines offered by an organization.
9-47

48. ©McGraw-Hill Education.
Protocol
A protocol is 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.
9-48

49. ©McGraw-Hill Education.
New-Product Development Process
The new-product development process
consists of the seven stages an organization
goes through to identify opportunities and
convert them to salable products or
services.
9-49

50. ©McGraw-Hill Education.
New-Product Strategy Development
New-product strategy development is the
stage of the new-product process that
defines the role for a new product in terms of
the firm’s overall objectives.
9-50

51. ©McGraw-Hill Education.
Idea Generation
Idea generation is the stage of the new-
product process that develops a pool of
concepts to serve as candidates for new
products, building upon the previous stage’s
results.
9-51

52. ©McGraw-Hill Education.
Screening and Evaluation
Screening and evaluation is the stage of
the new-product process that internally and
externally evaluates new-product ideas to
eliminate those that warrant no further effort.
9-52

53. ©McGraw-Hill Education.
Customer Experience Management (CEM)
Customer experience management (CEM)
is the process of managing the entire
customer experience within the company.
9-53

54. ©McGraw-Hill Education.
Business Analysis
Business analysis is the stage of the new-
product process that specifies the features
of the product and the marketing strategy
needed to bring it to market and make
financial projections.
9-54

55. ©McGraw-Hill Education.
Development
Development is the stage of the new-
product process that turns the idea on paper
into a prototype.
9-55

56. ©McGraw-Hill Education.
Market Testing
Market testing is the stage of the new-
product process that exposes actual
products to prospective consumers under
realistic purchase conditions to see if they
will buy.
9-56

57. ©McGraw-Hill Education.
Commercialization
Commercialization is the stage of the new-
product process that positions and launches
a new product in full-scale production and
sales.
9-57

58. ©McGraw-Hill Education.
Services
Services are the intangible activities or
benefits that an organization provides to
satisfy consumers’needs in exchange for
money or something else of value.
9-58

59. ©McGraw-Hill Education.
Open Innovation
Open Innovation consists of practices and
processes that encourage the use of
external as well as internal ideas, as well as
internal and external collaboration when
conceiving, producing, and marketing new
products and services.
9-59

60. ©McGraw-Hill Education.
Idle Production Capacity
Idle production capacity occurs when the
service provider is available but there is no
demand for the service.
9-60

61. ©McGraw-Hill Education.
Gap Analysis
Gap analysis is a type of analysis that
compares the differences between the
consumer’s expectations about and
experiences with a service based on
dimensions of service quality.
9-61

62. ©McGraw-Hill Education.
Services
Services are the intangible activities or
benefits that an organization provides to
satisfy consumers’ needs in exchange for
money or something else of value.
9-62

63. ©McGraw-Hill Education.
Four I’s of Services
The four I’s of services consists
of the four unique elements to services:
intangibility, inconsistency, inseparability,
and inventory.
9-63

64. ©McGraw-Hill Education.
Idle Production Capacity
Idle production capacity occurs when the
service provider is available but there is no
demand for the service.
9-64