Chapter 10 Developing New Products and Services I New Products Who needs em Examples I think there is a world market for maybe 5 comp Thomas Watson Chairman IBM 1943 The radio craze will die out in time Edison 1922 II Great Ideas are the cornerstone of business success a Price Waterhouse Coopers i 50 or more of plausible business ideas come from customers competitors and suppliers ii The rest From a company s employee iii The Challenge Stimulate employees to make suggestions b Imaginatik Idea Central III Understanding the terms a What is a product i A set of tangible and intangible attributes ii May be a good service place person idea iii Which provide satisfaction of needs wants desires in the form of benefits iv And is exchanged for money value b The Total Product i A Broad spectrum bundle of tangible and intangible benefits ii Primary Characteristics 1 Basic features of the core product iii Auxiliary Dimensions Supplementary Benefits 1 Example Ultrabrite Advanced Whitening Toothpaste 93 Core Product Ultrabrite Toothpast e 94 III Understanding the terms c Product Line i A group of closely related products that satisfy 1 a class of needs 2 are used together 3 are sold to the same customer group 4 are distributed through the same type of outlets 5 or fall within a given price ii EXAMPLE Product Lines at Church Dwight Co Inc 1 Consumer Product Lines a Household Deodorizers b Household Cleaners brillo c Oral Care Products close up d Laundry Products oxy clean e Pet Care Products f Personal Care Products g Arm Hammer Baking Soda h Deodorant Anti Perspirants i The number of product lines offered by a company i The number of product lines carried Church Dwight is broad Spyder d Product Mix e Width of Product Mix Paintball is narrower f Depth of Product Mix i Average Number of Products in each line g Consistency of Product Mix i How similar are our product lines 95 ii PRODUCT MIX EXAMPLE Hair Care Shampoo Conditioner Hair Spray Comb Salty Snacks Dental Care Soft Drinks Chips Nuts Crackers Toothbrush Toothpaste Dental Floss Colas Ginger Ale Root Beer IV Classifying Products a Consumer Goods i products purchased by the ultimate consumer ii Based on Durability Tangibility Classification goods services continuum iii Based on CONSUMER S Interest LOW Willingness to Expend Effort for the Product High 96 iv CONVENIENCE PRODUCTS 1 Characteristics a Relatively Inexpensive b Purchase is regular and recurring c Little Thinking Involved d Minimal Shopping Effort e Bought a most convenient location f Staple products like groceries and g Impulse purchases candy bar 2 STRATEGY a Make available in every possible place b Must be visible inside the store c Distribution is a major marketing mix factor another brand e Extensive advertising is used v Shopping Products 1 CHARACTERISTICS a Product comparisons occur b Consumer seek information c Decisions are based on thought d Relatively higher prices e Often technology or fashion oriented f Monetary social risks g Brand loyalty may be found 2 STRATEGY a Selective distribution d Easy substitution by similar brands consumer will accept b Consumers will seek products in less visible locations c Product attributes and Quality are important d Product differentiation is possible vi Specialty Products 1 CHARACTERISTICS a Substitutes are not accepted 97 b Infrequently purchased c Extensive Search d Brand loyalty may be strong e Loyalty to retailer may be as important as brand selection f May travel great distances to acquire b Consumers will seek products regardless of location c Extensive product and price differentiation 2 STRATEGY a Limited distribution d Strong brand image vii Unsought Products 1 CHARACTERISTICS a Consumer does not know about or does not want the product initially b Interest is likely caused by a sudden or unexpected problem rain umbrella death funeral plot c The consumer is not likely to be loyal and will accept substitutes 2 STRATEGY a Limited distribution arises approach b Need to advertise so consumers are aware when the need c May require persistent and aggressive advertising and selling Example Fortune Brands Segmented based on Consumer Markets b Business Goods i Products that assist directly or indirectly in providing products for resale Also called B2B goods industrial goods or organizational goods 1 Manufactured materials and component parts electrical resistors screws electric motors computer chips spark plug 98 2 Process materials raw materials used in production become part of finished product chemicals wood wheat cotton 3 Installations primary production equipment and major capital items buildings computer hardware assembly lines oil drilling rig 4 Accessory equipment Copiers office equipment cell phone hand tools 5 Maintenance Repair and Operating Supplies facilitate routine operations writing paper staples tape Post it notes 6 Services intangible product provided by others to facilitate the firm s production and operation maintenance repairs trucking security service legal advice consulting V Product Development a The development of new products b The continuous improvement of existing products c WHY bother i Any company that does not innovate will eventually be crushed by competition or abandoned by its consumers iii EXAMPLE Innovation at two very different companies ii Innovate or Die 1 GOOGLE team a Ideas come from everyone in the company even the finance b Open information on every project every idea every deadline c Favor intelligence over experience d Employees get a free day each week to innovate 50 percent of new products come from this time e Don t politic for your idea use data eliminate I like for real data f Give people a vision rules how to get there and deadlines creativity loves constraints g Simple to use and easy to love the money will follow this 2 Whirlpool as well a Stick with it it can take up to six years to attain a big payback b Innovation alone is not enough need operational excellence 99 c Be highly practical inventions have to be something someone will buy d At Whirlpool sales from new product ideas less than 5 years old were less than 30 million today they are more than 1 2 billion VI Differing Perspectives of New Products a Newness Compared with Existing Products Functionally Different b Newness in Legal Terms for 6 months after regular distribution 1 Diversification into an established market for an existing product c Management perspective i New to the world products true innovation 1 High Risk ii