Ch.9 Developing New Products and Services

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Good
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Has tangible attributes that a consumer’s five senses can perceive.
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Nondurable Good
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Item consumed in one or a few uses, such as food products and fuel; RELY HEAVILY ON CONSUMER ADVERTISING.
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Durable Good
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One that usually lasts over many uses, such as appliances, cars, and smartphones; EMPHASIZE PERSONAL SELLING.
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Services
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Intangible activities or benefits that an organization provides to satisfy consumers’ needs in exchange for money or something else of value.
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Idea
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A thought that leads to a product or action, such as a concept for a new invention or getting people out to vote.
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3 Categories for Equipment-Based Services
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Services do not have the marketing concern of inconsistency because people are removed from the provision of the service. 1. Automated (self-service) 2. Those operated by relatively unskilled operators 3. Those operated by skilled operators
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Federal Trade Commission (FTC)
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Advises that the term “new” be limited to use with a product up to six months after it enters regular distribution; the difficulty with this suggestion is in the interpretation of the term “regular.”
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Product
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Not only physical goods but services and ideas as well.
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Consumer Products
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Products purchased by the ultimate consumer.
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Business Products
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Products organizations buy that assist in providing other products for resale.
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2 Classifying Products
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1. Consumer products – not only physical goods but services and ideas as well 2. Consumer products – products purchased by the ultimate consumer
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4 Types of Consumer Products
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1. Convenience product – items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort; PROMOTION STRESSES PRICE, AVAILABILITY, AND AWARENESS 2. Shopping product – items for which the consumer compares several alternatives on criteria such as price, quality, or style; PURCHASED INFREQUENTLY AND REQUIRE EXTENDED SHOPPING TIME TO COMPARE OFFERINGS 3. Specialty product – items that the consumer makes a special effort to search out and buy 4. Unsought product – items that the consumer does not know about or knows about but does not initially want
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Convenience Product
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Items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort.
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Shopping Product
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Items for which the consumer compares several alternatives on criteria such as price, quality, or style.
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Specialty Product
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Items that the consumer makes a special effort to search out and buy.
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Unsought Product
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Items that the consumer does not know about or knows about but does not initially want.
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Derived Demand
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Sales of business products frequently result (or are derived) from the sale of consumer products.
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Components
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Items that become part of the final product; includes raw materials such as lumber, as well as assemblies such as a Ford car engine.
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New Product
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Can only be classified as such if the product is functionally different from existing products.
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Support Products
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Items used to assist in producing other products and services; products such as tools and repair services.
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4 Things to Assist Support Products
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1. Installations – buildings and fixed equipment 2. Accessory equipment – tools and office equipment 3. Supplies – stationary, paper clips, and brooms 4. Industrial services – maintenance, repair, and legal services
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3 Ways to Deliver Services
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1. People or equipment 2. Business firms or nonprofit organizations 3. Government agencies
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4 I’s of Services
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Four unique elements that distinguish services from goods. 1. Intangibility – being intangible, services can’t be touched or seen before the purchase decision 2. Inconsistency – services depend on the people who provide them, so quality varies with each person’s capabilities and day to day job performance; PHILADELPHIA PHILLIES 3. Inseparability – consumer cannot distinguish the service provider from the service itself 4. Inventory – many goods have inventory handling costs that relate to their storage, perishability, and movement; idle production capacity
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Idle Production Capacity
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When the service provider is available but there is no demand for the service.
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Gap Analysis
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Differences between the consumer’s expectations and his or her actual experiences; asks consumers to assess their expectations and experiences on dimensions of service quality.
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3 Dimensions of Service Quality for Airline Customers
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1. Reliability – flight on time? 2. Tangibility – gate, plane, and baggage area clean? 3. Responsiveness – flight attendants willing to answer my questions?
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Product Class
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Industry to which they belong.
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Product Forms
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Products within a product class.
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Product Item
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Specific product that has a unique brand, size, or price.
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Stock Keeping Unit (SKU)
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Unique identification number that defines an item for ordering or inventory purposes.
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Product Line
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Group of products that are closely related because they are similar in terms of consumer needs and uses, market segments, sales outlets, or prices.
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Product Mix
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All the product lines offered by a company.
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Continuous Innovation
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Consumers don’t need to learn new behaviors.
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Dynamically Continuous Innovation
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Minor changes in behavior are required.
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Discontinuous Innovation
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Involves making the consumer learn entirely new consumption patterns to use the product.
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3 Types of Innovation
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1. Continuous innovation – consumers don’t need to learn new behaviors 2. Dynamically continuous innovation – minor changes in behavior are required 3. Discontinuous innovation – involves making the consumer learn entirely new consumption patterns to use the product
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Regular Distribution
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Difficulty with interpretation of this term.
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Product Line Extension
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Lowest level, least risk.
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Brand Extension
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Involves putting an established brand name on a new product in an unfamiliar market.
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3 Step Protocol of New Product or Service
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1. Well-defined target market 2. Specific customers’ needs, wants, and preferences 3. What the product will be and do to satisfy consumers
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8 Reasons for New-Product Failures
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1. Insignificant point of difference – research shows that a distinctive point of difference is the single most important factor for a new product to defeat competing one 2. Incomplete market and product protocol before product development starts – without this protocol firms try to design a vague product for a phantom market 3. Not satisfying customer needs on critical factors – overlapping somewhat with #1, this factor stresses that problems on one or two critical factors can kill the product, even though the general quality is high 4. Bad timing – results when a product is introduced too soon, too late, or when consumer tastes are shifting dramatically 5. No economical access to buyers – grocery products 6. Poor product quality – factor often results when a product is not thoroughly tested 7. Poor execution of the marketing mix; brand name, package, price, promotion, distribution – somewhere in the marketing mix there can be a showstopper that kills the product 8. Too little market attractiveness – the ideal is a large target market with high growth and real buyer need
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2 Organizational Inertia in New-Product Failures
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1. Encountering “groupthink” in task force and committee meetings 2. Avoiding the “NIH problem”
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New-Product Process
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Seven stages an organization goes through to identify business opportunities and convert them into salable products or services.
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7 Stages of New-Product Process
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1. New-product strategy development – defines the role for a new product in terms of the firm’s overall objectives; SWOT ANALYSIS AND ENVIRONMENTAL SCANNING 2. Idea generation – involves developing a pool of concepts to serve as candidates for new products , building upon the previous stages’ results 3. Screening and evaluation – internally and externally evaluates new-product ideas to eliminate those that warrant no further effort 4. Business analysis – specifies the features of the product and the marketing strategy needed to bring it to market and make financial projections 5. Development – turns the idea on paper into a prototype 6. Market testing – involves exposing actual products to prospective consumers under realistic purchase conditions to see if they will buy 7. Commercialization – positions and launches a new product in full-scale production and sales
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Crowdsourcing
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Involves generating insights leading to actions based on ideas from massive numbers of people.
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Nontraditional Firms
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Smaller; small technology firms and even small, nontraditional form in adjacent industries provide creative advances.
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Universities
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Many universities have technology transfer centers that often partner with business firms to commercialize faculty inventions.
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Inventors
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Inventions.
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Crowdfunding
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Way to gather an online community of supporters to financially rally around a specific project that is unlikely to get resources from traditional sources such as banks or venture capital firms.
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5 Crowdfunding Sources
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1. Crowdrise – charitable causes 2. Crowdtilt – anything 3. Fundable – early stage financing for start-up businesses 4. Rally – nonprofits, artists, musicians, entrepreneurs 5. GiveForward – medical causes
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Customer Experience Management (CEM)
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Process of managing the entire customer experience within the company.
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Concept Tests
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External evaluations with consumers that consist of preliminary testing of a new-product idea rather than an actual product; PART OF THE SCREENING AND EVALUATION STAGE OF THE NEW-PRODUCT PROCESS.
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Off-Peak-Pricing
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Charge different prices during different times of the day or during different days of the week to help match the supply and demand for their services.
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3 Types of Test Markets
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1. Standard test markets – a company develops a product and then attempts to sell it through normal distribution channels in a number of test-market cities 2. Controlled test markets – involves contracting the entire test program to an outside service 3. Simulated test markets (STM) – technique that somewhat replicates a full-scale test market
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Standard Test Markets
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A company develops a product and then attempts to sell it through normal distribution channels in a number of test-market cities.
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Controlled Test Markets
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Involves contracting the entire test program to an outside service.
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Simulated Test Markets (STM)
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Technique that somewhat replicates a full-scale test market.
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When Test Markets Don’t Work
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Test marketing a service is very difficult because consumers can’t see what they are buying.
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Slotting Fee
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Payment a manufacturer makes to place a new item on a retailer’s shelf.
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Failure Fee
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Penalty payment a manufacturer makes to compensate a retailer for devoting valuable shelf space to a product that failed to sell.
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Regional Rollouts
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Introduce a product sequentially into geographical areas of the United States to allow production levels and marketing activities to build up gradually, to minimize the risk of new-product failure.
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Time to Market (TtM)
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Often vital in introducing a new product.
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Parallel Development
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Cross-functional team members who conduct the simultaneous development of both the product and the production process stay with the product from conception to production.
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Fast Prototyping
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“Do it, try it, fix it” approach– encouraging continuing improvement even after the initial design.
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Business Researchers
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Emphasize that firms must actively involve customers and suppliers in the new-product development process; this means the focus should be on what the new product will do for them rather than simply what they want.
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X-1 Products Target Market
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Initial target market are athletes who wanted waterproof, sweatproof, and weatherproof audio equipment.
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Garlic Cake
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Because the company forgot to explain what this bread was meant for, the product ended in failure; this information should have been a key promotional (advertising) element of the marketing mix.
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Business Analysis for Services
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Involves using capacity management to find ways to match the availability of the service offering to when it is needed. Example: Airlines and mobile phone service providers use off-peak pricing to change different prices during different times of the day or during different days of the week to help match the supply and demand for their services.
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Expectations of a Service
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Influenced by word-of-mouth communications, personal needs, past experiences, and promotional activities, while actual experiences are determined by the way an organization actually delivers its service.

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