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  1. 1. Chapter 9Product Planning and Development Sommers S Barnes Ninth Canadian Edition Presentation by Karen A. BlotnickyMount Saint Vincent University, Halifax, NS Copyright © 2001 by McGraw-Hill Ryerson Limited
  2. 2. Chapter GoalsTo gain an understanding of:• The meaning of total “product” and “new” product• Classification of business and consumer products and its relevance to marketing planning• Product innovation• The product-development process• When to add new products to a product line• The adoption and diffusion process for products• Organizational structures for product planning and development Copyright © 2001 McGraw-Hill Ryerson Limited 9-2
  3. 3. 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 Toronto Symphony, 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 Copyright © 2001 McGraw-Hill Ryerson Limited 9-3
  4. 4. The Total Product Product quality Physical Seller’s characteristics services of goods Seller’s Price reputation Colour Brand Product warranty Packaging Design Copyright © 2001 McGraw-Hill Ryerson Limited 9-4
  5. 5. Consumer GoodsClassesConsumer products can be classified by the buying behaviour of the consumers:• Convenience goods are bought with little time and effort, such as milk, bread, a chocolate bar.• Shopping goods are those where extensive comparison is the norm-- cars, furniture, clothes.• Specialty goods are those for which consumers have a strong brand preference. BMW, Armani.• Unsought goods are those now unknown to the consumer or, if known, undesired. Copyright © 2001 McGraw-Hill Ryerson Limited 9-5
  6. 6. Classifying BusinessProducts• raw materials: unprocessed, become part of materials 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 supplies firms, convenience products for businesses Copyright © 2001 McGraw-Hill Ryerson Limited 9-6
  7. 7. Innovation isRequired• Products go through life cycles-- you need new ones coming on stream.• Profits highest when products new.• Consumers more selective: they look carefully 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. Copyright © 2001 McGraw-Hill Ryerson Limited 9-7
  8. 8. Ten World-ClassProduct Failures1. 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. Copyright © 2001 McGraw-Hill Ryerson Limited 9-8
  9. 9. New ProductDevelopment• companies must be constantly modifying existing products and developing new ones; the marketplace demands it• how new is new? most new products are modifications of or extensions to existing ones• the introduction of a new product is a strategic decision which should be guided by the company’s goals and a new product introduction strategy Copyright © 2001 McGraw-Hill Ryerson Limited 9-9
  10. 10. Identify The New Productthe strategic Development Process role of new products, then... 1. 2. 3. 4. 5. 6. Idea Screening Business Prototype Market Commer-generation of ideas analysis development Tests cialization Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 10
  11. 11. The New Product Development Process • A new product is best developed through a series of six stages: • The first two stages provide a focus for generating new-product ideas and a basis for evaluating them. • The next three stages deal with ideas and are the least expensive. • In their haste, some companies skip stages — the most common omission being market tests. Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 119-7
  12. 12. Criteria forNew 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 Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 12
  13. 13. Development of NewProduct Strategy Company Product Strategy Examples GoalsDefend market Introduce addition to Pizza Hut’s “Bigshare existing produce New Yorker” and line/ revise existing “Stuffed Crust” product piesStrengthen Introduce a really Digital camerasreputation as new product - not introduced byan innovator just an extension of Sony, Canon, an existing product and other firms Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 13
  14. 14. Adoption-DiffusionProcess• different new products are adopted by consumers at different rates• the individual consumer goes through certain stages before adopting a new product• marketers must be interested in first creating awareness, then interest, then trial, before the consumer is considered an adopter• some people are genuine innovators, while others wait and try later; some never adopt Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 14
  15. 15. New Product Adoptionand Diffusion • Adoption process: The decision- making activity of an individual through which the new product is accepted. • Diffusion: The process by which an innovation is spread through a social system over time. Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 15
  16. 16. Stages in theAdoption Process• awareness: customer is exposed to the product• interest: interest and information seeking• evaluation: assessment of the advantages and disadvantages of the new product• trial: customer tries the product in low-risk situation; may be a sample or test drive• adoption: customer decides to buy the product• confirmation: customer decides to stay with the product; attempts dissonance reduction Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 16
  17. 17. Adopter Categories• Researchers have identified five categories of individual adopters for new products: • Innovators — 3% of the market. • Early adopters — 13% of the market. • Early majority — 34% of the market. • Late majority — 34% of the market. • Laggards — 16% of the market.• In addition, some individuals — nonadopters — never accept the innovation. Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 17
  18. 18. Five Characteristics AffectingAdoption Rate: ExampleEvaluation of new safer baseball for youngsters: 1. Relative advantage—superior to current balls in terms of safety but not tradition. 2. Compatibility—coincides with cultural values and experiences of parents but not of coaches. 3. Complexity—no problem understanding. 4. Trialability—ball can be easily tested. 5. Observability—can see a youngster who’s hit with the new ball dust off and trot to first base. Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 18
  19. 19. New ProductOrganizationCompanies take a variety of approachesto 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 Copyright © 2001 McGraw-Hill Ryerson Limited 9 - 19