copyright © 2012 pearson canada inc.8 - 1 developing and managing products and services chapter 8

Copyright © 2012 Pearson Canada Inc.8 - 1

Developing and Managing

Products and Services

Chapter 8


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 Winnipeg Symphony Orchestra, 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 Classes

Consumer 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


New-Product Development Strategy

• New-product development:– The development of original products,

improvements, modifications, and new brands through the firm’s product-development efforts

• New product innovation is expensive and risky– Estimated 80% of all new products fail or

dramatically underperform


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


New-Product Development Process

• Major stages in new-product development:


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


New Product Development



• Idea generation:– Internal sources:

• Company employees at all levels

– External sources:• Customers• Competitors• Distributors and suppliers• Others (including trade magazines and shows,

advertising agencies, marketing research firms, laboratories, and inventors)



• Idea screening:– Process used to spot good ideas and drop

poor ones– Describe product or service, target market,

and competition– Estimate market size, price, development time

and costs, manufacturing costs, rate of return– Evaluate new-product ideas against a set of

company criteria



• Concept development and testing:– Product concept:

• Detailed version of the new-product idea stated in meaningful consumer terms

– Concept testing: • Testing new-product concepts with groups of

potential consumers to find out if the concepts have strong consumer appeal



• Marketing strategy development:– Involves designing an initial marketing

strategy and a three part marketing strategy statement

1. Describe the target market, planned value proposition, sales, market share, and profit goals

2. Outline the product’s planned price, distribution, and marketing budget

3. Describe the planned long-run sales and profit goals, marketing mix strategy



• Business analysis:– Review of the sales, costs, and profit

projections to assess fit with company objectives

– If results are positive, project moves to the product development phase



• Product development:– Develops concept into a physical product– Calls for a large investment– Prototypes are developed and tested– Prototypes must have required functional

features and convey psychological characteristics



• Test-marketing:– Product and marketing program are

introduced into a realistic market setting– Not needed for all products– Provides marketing experience before going

to the expense of full introduction

• Commercialization:– Full-scale introduction of the product into the

market


Managing New-Product Development

• Customer centered approach:– Focuses on solving customer problems and

offers compelling customer value proposition

• Team-based approach:– Departments work together, overlapping steps

to save time and increase effectiveness

• Systematic approach:– Innovation management systems collect,

review, evaluate, manage new-product ideas


New Product Organization

Companies 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


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


Product Life Cycle


Product and Service Decisions

• Decisions about individual products involve:– Product attributes such as quality, features,

style and design– Packaging (bi-lingual in Canada)– Labeling (identify, describes, and promotes

brand)– Product support services (customer phone or

email)


Product and Service Decisions

• Decisions about product lines involve:– Product line length– Line filling or line stretching

• Product mix has four dimensions:– Width– Length– Depth– Consistency


Services Marketing

• Services are the most important industry in Canada’s economy and includes:– Government services, hospitals, military,

police, Canada Post, schools, not-for-profit organizations

– Business services segment (for-profit companies) such as banks, airlines, hotels, real-estate firms


Services Marketing

• Consider four characteristics when designing services marketing programs:


The Service-profit chain


Services Marketing

• Service marketing faces three major marketing tasks, to increase:– Service differentiation– Service quality– Service productivity

copyright © 2012 pearson canada inc.8 - 1 developing and managing products and services chapter 8

Documents

physical products

manufactured products

pearson canada

convenience products

products installations

total product slide

processed products

products of esso