chapter 9 product planning and development copyright © 2001 by mcgraw-hill ryerson limited sommers ...

Chapter 9Product Planning and

Development

Copyright © 2001 by McGraw-Hill Ryerson Limited

Sommers Sommers Barnes BarnesNinth Canadian EditionNinth Canadian Edition

Presentation byPresentation by

Karen A. BlotnickyKaren A. Blotnicky

Mount Saint Vincent University, Halifax, NSMount Saint Vincent University, Halifax, NS

Copyright © 2001 McGraw-Hill Ryerson Limited9 - 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


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


Seller’sservices

Seller’sservices

Productquality

Productquality Physical

characteristicsof goods

Physicalcharacteristics

of goods

PricePrice

BrandBrand

DesignDesign

PackagingPackagingProductwarranty

Productwarranty

Seller’sreputation

Seller’sreputation

ColourColour

The Total Product


Consumer Goods ClassesConsumer products can be classified by the

buying behaviour of the consumers:• Convenience goodsConvenience goods are bought with little

time and effort, such as milk, bread, a chocolate bar.

• Shopping goodsShopping goods are those where extensive comparison is the norm-- cars, furniture, clothes.

• Specialty goodsSpecialty goods are those for which consumers have a strong brand preference. BMW, Armani.

• Unsought goodsUnsought goods are those now unknown to the consumer or, if known, undesired.


Classifying Business Products

• raw materialsraw materials: unprocessed, become part of other manufactured products

• manufactured parts and materials:manufactured parts and materials: processed products that become part of other products

• installations:installations: major buildings and equipment• accessory equipment:accessory equipment: used in operations,

include computers, desks, tools• operating suppliesoperating supplies: low value, used by most

firms, convenience products for businesses


Innovation is Required• 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.


1. 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.

Ten World-Class Product Failures


New Product Development• 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


Identifythe strategicrole of newproducts,

then...

Identifythe strategicrole of newproducts,

then...

1.Idea

generation

1.Idea

generation

2.Screeningof ideas

2.Screeningof ideas

3.Businessanalysis

3.Businessanalysis

4. Prototype

development

4. Prototype

development

5.MarketTests

5.MarketTests

6.Commer-cialization

6.Commer-cialization

The New Product Development Process


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.

9-7


Criteria for New 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


Development of New Product Strategy

Company Goals

Product Strategy

Examples

Defend market share

Introduce addition toexisting produce line/ revise existing product

Pizza Hut’s “BigNew Yorker” and “Stuffed Crust” pies

Strengthenreputation as an innovator

Introduce a really new product - not just an extension of an existing product

Digital camerasintroduced by Sony, Canon, and other firms


Adoption-Diffusion Process• 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


New Product Adoption and Diffusion

• Adoption process:Adoption process: The decision-making activity of an individual through which the new product is accepted.

• Diffusion:Diffusion: The process by which an innovation is spread through a social system over time.


Stages in the Adoption Process

• awareness:awareness: customer is exposed to the product

• interest:interest: interest and information seeking• evaluation:evaluation: assessment of the advantages

and disadvantages of the new product• trial:trial: customer tries the product in low-risk

situation; may be a sample or test drive• adoption:adoption: customer decides to buy the

product• confirmation:confirmation: customer decides to stay

with the product; attempts dissonance reduction


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.


Evaluation 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.

Five Characteristics Affecting Adoption Rate: Example


New Product OrganizationCompanies 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

chapter 9 product planning and development copyright © 2001 by mcgraw-hill ryerson limited sommers ...

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