MARKETING CHAPTER 10 NOTES Marketing Chapter 10 Developing New Products and Services Product a good service or idea consisting of a bundle of tangible and intangible attributes that satisfies customers needs and is received in exchange for money or something else of value Good has tangible attributes that a consumer s 5 senses can perceive Nondurable Good is an item consumed in once or a few uses food fuel Durable Good is an item that usually lasts over many uses car appliances Services intangible activities or benefits that an organization provides to satisfy consumers needs in exchange for money or something else of value Idea a thought that leads to a product or action Classifying Products 2 broad categories 1 Consumer Products 2 Business Products providing other products for resale are products purchased by the ultimate consumer AKA B2B or industrial products are products organizations buy that assist in The four consumer products differ in terms of 1 The effort the consumer spends on the decision 2 The attributes used in making the purchase decision and 3 The frequency of purchase Convenience Products are items that the consumer purchases frequently conveniently and with a minimum of shopping effort Shopping Products are items for which the consumer compares several alternatives on criteria such as price quality or style Specialty Products are items that the consumer makes a special effort to search out and buy Unsought Products are items that the consumer foes not know about or knows about but does not initially want MARKETING CHAPTER 10 NOTES Type of Consumer Product Basis of Comparison Product Price Convenience Product Toothpaste cake mix hand soap ATM cash withdrawal Relatively Inexpensive Shopping Product Specialty Product Unsought Product Cameras TV s briefcases airline tickets Rolls Royce cars Rolex watches heart surgery Burial insurance thesaurus Fairly expensive Varies Usually very expensive 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 Business Products A major characteristic of business products is that their sales are often the result of derived demand that is sales of business products frequently result or are derived from the sale of consumer products Business Products may be classified as components or support products o Components are items that become part of the final products raw materials o Support Products are items used to assist in producing other goods and services Include Installations such as buildings and fixed equipment Accessory equipment such as tools and office equipment Supplies such as stationery paper clips and brooms Industrial services such as maintenance repair and legal services Product Items Product Lines and Product Mixes MARKETING CHAPTER 10 NOTES Product Item is a specific product that has a unique brand size or price Ultra Downy softener for clothes comes in several different sizes Each size is a separate stock keeping unit SKU a unique identification number that defines an item for ordering or inventory purposes 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 Nike product lines include shoes and clothing Mayo Clinic consists of inpatient hospital care and outpatient physician services Product Mix consists of all of the product lines offered by an organization Cray Inc has a small product mix of five super computer lines that are sold mostly to governments and large businesses Procter Gamble has a large product mix that includes product lines such as beauty and grooming and household care How Marketing Dashboards Can Improve New Product Performance The Using Marketing Dashboards box shows how marketers measure actual market performance versus the goals set in new product planning New products are the lifeblood of a company and keep it growing but the financial risks can be large What is a New Product The term new is difficult to define Newness Compared with Existing Products If a product is functionally different from existing products it can be defined as new Sometimes this newness is revolutionary and creates and whole new industry as in the case of the Apple II computer At other times more features are added to an existing product to try to appeal to more customers Newness from the Consumer s Perspective A second way to define new products is in terms of their effects on consumption This approach classifies new products according to the degree of learning required by the consumer Continuous Innovation consumers don t need to learn new behaviors Dynamically Continuous Innovation only minor changes in behavior are required Discontinuous Innovation involves making the consumer learn entirely new consumption patterns to use the product Low Degree of New Consumer Learning Needed MARKETING CHAPTER 10 NOTES Basis of Comparison Continuous Innovation Dynamically Continuous Innovation Disrupts consumer s normal routine but does not require totally new learning Electric toothbrush compact disk player and automatic flash unit for cameras Advertise points of difference and benefits to consumers Discontinuous Innovation Requires new learning and consumption patterns by consumers Wireless router digital video recorder and electric car Educate consumers through product trial and personal selling Requires no new learning by consumers New improved shaver detergent and toothpaste Gain consumer awareness and wide distribution Definition Examples Marketing Strategy Newness in Legal Terms The U S Federal Trade Commission FTC advises that the term new be limited to use with a product up to six months after it enter regular distribution The difficulty with this suggestion is in the interpretation of the term