Chapter 9
Product Planning and
Development
Sommers

Barnes
Ninth Canadian Edition
Presentation by
Karen A. Blotnicky
Mount Saint Vincent University, Halifax, NS
Copyright © 2001 by McGraw-Hill Ryerson Limited
Chapter Goals
To 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
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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
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The Total Product
Seller’s
services
Product
quality
Physical
characteristics
of goods
Seller’s
reputation
Price
Colour
Brand
Product
warranty
Packaging
Design
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Consumer Goods
Classes
Consumer products can be classified by the
buying behaviour of the consumers:
• Convenience goods are bought with little time
and effort, such as milk, bread, a chocolate bar.
• Shopping goods are those where extensive
comparison is the norm-- cars, furniture,
clothes.
• Specialty goods are those for which consumers
have a strong brand preference. BMW, Armani.
• Unsought goods are those now unknown to the
consumer or, if known, undesired.
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Classifying Business
Products
• raw materials: unprocessed, become part of
other manufactured products
• manufactured parts and materials: processed
products that become part of other products
• installations: major buildings and equipment
• accessory equipment: used in operations,
include computers, desks, tools
• operating supplies: low value, used by most
firms, convenience products for businesses
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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.
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Ten World-Class
Product Failures
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.
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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
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Identify
the strategic
role of new
products,
then...
1.
Idea
generation
The New Product
Development Process
2.
3.
4.
Screening Business Prototype
of ideas
analysis development
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5.
Market
Tests
6.
Commercialization
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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.
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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
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Development of New
Product Strategy
Company
Goals
Product Strategy
Defend market Introduce addition to
share
existing produce
line/ revise existing
product
Strengthen
Introduce a really
reputation as new product - not
an innovator
just an extension of
an existing product
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Examples
Pizza Hut’s “Big
New Yorker” and
“Stuffed Crust”
pies
Digital cameras
introduced by
Sony, Canon,
and other firms
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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
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New Product Adoption
and Diffusion
• Adoption process: The decisionmaking activity of an individual
through which the new product is
accepted.
• Diffusion: The process by which
an innovation is spread through a
social system over time.
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Stages in the
Adoption Process
• awareness: customer is exposed to the
product
• interest: interest and information seeking
• evaluation: assessment of the advantages and
disadvantages of the new product
• trial: customer tries the product in low-risk
situation; may be a sample or test drive
• adoption: customer decides to buy the
product
• confirmation: customer decides to stay with
the product; attempts dissonance reduction
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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.
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Five Characteristics Affecting
Adoption Rate: Example
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.
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New Product
Organization
Companies take a variety of approaches
to 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
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