Marketing Exam 3 Notes: Chapter 11: Developing and Managing Products (03/24/14)1. Improvement or revisions of existing products2. Repositioned products3. Lower-priced products4. The New Product development processa. Exhibit 11.1 (pg.180)b. New Product strategy i. Have a new product Strategyii. Idea Generation1. Sources for ideas: R&D, Customers writing in, Employees, distributors, vendors, competitors, and consultants.a. Pillsbury Recipe Contest. (Used to generate new products)2. Have a suggestion box, metal box with a lock, once a week the VP would openthe suggestion box and read through it. Part of the organization strategy to come up with new ideas, create an effective way to generate new ideas. 3. Bring together multiple departments to brainstorm. 4. Wal-Mart wanted an 18 pack of Shasta Sodas. a. Get the other disciplines to make commentsb. Nothing is too dumb to share. iii. Idea screening1. 99% get screened the minute they are suggested. a. Material could be wrong, too much money or not enough man powerb. Most new products are rejected at the screening stage.iv. Business Analysis1. Preliminary figures for demand, cost, sales and profitability are calculated. v. Development1. Sketch a market strategy, start developing a prototype and build sample products. vi. Test Marketing1. Pick a city that is representative of the American Populationa. Tucson, Arizona, used to be a good cross section of the US.b. Grand Rapids is now the best area as the cross section of the US.2. Focus groups: Gillett requests that no one shaves until they come into work.3. Frito-Lay no longer Test Markets their products. 4. Very Costly!!vii. Commercialization1. Making the decision to commercialize a product or make it available for sale. 2. Firms that routinely introduce new products share the following characteristics:a. A history of listening carefully to customersb. An obsession with producing the best product possiblec. A vision of what that market will be like in the futured. Strong leadershipe. A commitment to new-product developmentf. A project based team approach to new product developmentg. Getting every aspect of the product development process right.viii. New Product has been CREATED!5. The Spread of New Products. a. “Managers have a better chance of successfully marketing products if they understand how consumers learn about and adopt products” (pg.187)b. Diffusion of Innovation (1st Time Buyers): process by which the adoption of an innovation spreads. Diffusion process:i. Innovators (2.5%)1. Venturesomeii. Early Adopters (13.5%)1. Opinion Leadersiii. Early Majority (34%)1. Deliberateiv. Late Majority (34%)1. Skeptical v. Laggards (16%)1. Traditional2. Percentages will not be on the test!!!6. Product Characteristics and the Rate of Adoption: (Introduction of the Microwave (RadarRange vs.50inch T.V.)a. The Adoption process (acceptance):i. Complexityii. Compatibilityiii. Relative Advantageiv. Observabilityv. “Trialability”7. Product Life Cycles: The PLC can be used to analyze a brand, a product form, or a product categorya. Stages:i. R&D: New item Idea (HUGE COSTS -$$$)1. Wombii. Introduction ($ starting to be generated)1. Birthiii. Growth (Sales increasing $$, Profits peak due to competition -$)1. Competitors begin to appear. a. Break-even point (Profits=Costs)b. Price wars, increased advertising costs, profits shrink2. Childhoodiv. Maturity Stage (Sales, Profits highest point, $$$)1. Adultv. Decline Stage (sales, profits begin to decline -$$)1. Old/DyingChapter 12: Services and Nonprofit Organization Marketing (3/24/14)1. 12-2 How Service Goods differ from Goodsa. Services are:i. Intangibles: cannot be touched, seen, tasted, heard or flt in the same manner that goods can be sensedii. Inseparable: means the consumer must be present during the productioniii. Heterogeneous: standardization or production and consumer connection with employees1. Subway sandwich guyiv. Perishable: inability of services to be stored, warehoused or inventoried. 1. Empty hotel room, Airplane seats. 2. Service Qualitya. Reliabilityb. Responsiveness c. Assuranced. Empathye. Tangibles: Physical Location3. Marketing Mixes for Servicesa. Product Strategy i. Service as a process: Services processing people or possessions.ii. 4 categories:1. People2. Possessions3. Mental Stimulus4. Info Processiii. Core and Supplementary Service Products1. Core Service: most basic benefit the customer is seeking.a. Bed in hotel room2. Supplementary servicesa. T.V., fridge, couch, lock, door, windows, shower, toilet, pool, breakfastiv. Mass customizationb. The Service Mix: most service organizations market more than one service. i. Example; TruGreen4. Place (Distribution) Strategya. Different locations for different types of firms.5. Promotion Strategya. Stressing Tangible Cues: concrete symbol of the service offeringb. Using personal info sources: something people can relate to (celebrity in some cases)c. Creating a strong organizational image: “McDonalds golden arcs”i. Professor story about getting a suit from Hong-Kong, that was perfect and has his initials on the cuffsd. Engaging in post-purchase communication: follow-up activities after a customer transaction.6. Price Strategya. Two guys take their MCAT exams and both score high and both get accepted to Harvard and both want to do plastic surgery, exactly identical but one goes to work in Beverly Hills and the other in Santa Ana. Who makes more $? Beverly Hills guy. Services pricing can varygreatly by location.7. Relationship Marketing in Services: many services involve ongoing interaction between the service organization and the customer. a. Level 1: Financial: a price incentive/discount, to entice people. (Very common)b. Level 2: Social: Social bond, (concierge level of hotel). Firm learns about customers’ individual needs and wants.c. Level 3: Structural: Bonds, many hotels leave treats for long-term customers. i. Developed by offering value-added services that are not readily available from otherfirms. 1. Marriot Platinum Elite Membership. 8. Internal Marketing in Service Firms: services are performances, so the quality of a firm’s employees is an important part of building long-term relationships with customers. a. Internal marketing: treating employees as customers and developing systems and benefits that satisfy their needs. b. To satisfy employees: i. Companies have designed and implemented a wide variety of programs such as:1. Flextime, day care, concierge