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Chapter 10.docx

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Department
Commerce
Course
COMMERCE 2MA3
Professor
Peter Johnson
Semester
Winter

Description
Chapter 10: Developing New Products & Services  Look externally for opportunities and develop core competencies to be successful – ex. Apple  Look at core competencies internally and see where it can be applied. Variations of Products  Product: Good or service or idea that offers both tangible and intangible attributes (end benefits) to satisfy the customer o Tangible benefits are specific (taste/feel) o Intangible are general (health and wealth)  Product Mix: number of product lines offered by a company  Businesses bundle products into product groups  Product line: group of products that are closely related in some important way (i.e. used together, sold to same customer group, fall within given price range, etc.) o Examples:  products that meet similar needs (personal care product line or food product line)  products that are used together (all products associated with fishing)  products that are sold to specific groups/types of customers  Hospitals also bundle (out-patient and in-patient)  Classifying Products – to clarify and simplify manage  Types of User o Consumer goods: Products purchased by ultimate consumer o Business goods: Products that assist directly/indirectly in providing products for resale  SKU: Stock keeping unit  Degree of Tangibility: o Non-durable: consumed quickly, frequently purchased (frequent awareness prompting to advertising and need large distribution) o Durable: last a long time (more direct personal selling needed) o Services: activities (lengthy communication; usually by local businesses) Figure 10-1: Consumer Product Classifications  Convenience Goods: frequent purchase and minimum shopping effort  Shopping Goods: compare several alternatives on criteria such as quality, price or style  Specialty Goods: need special effort to search out and buy (higher price; high brand loyalty)  Unsought Goods: customer either doesn’t know about or doesn’t need it until something happens and they suddenly need it (no loyalty) – i.e. burial insurance 1 Classifying Consumer and Business Goods  Classification of Business Goods  Production Goods (primary): items that become part of the final product (raw materials or material components). o Always sold directly; Highly personal sales dominated area  Support Goods (secondary): items that assist production, such as: o Installations: buildings or fixed equip (high priced items); deals directly with sales reps; often through competitive bidding o Accessory Equipment: tools and office equipment o Supplies: similar to consumer convenience goods; consists of stationary, brooms, etc. little effort, using straight rebuy decision; Price and Delivery key factors in decision o Services: intangible activities used to assist business buyer. maintenance, repair, tax/legal counseling, etc. (sellers rep. critical) What is a New Product?  Functionally different from an existing product (could be revolutionary [such as telephone], or evolutionary [smartphones] o You either create a new market or cater to existing market  Newness Compared with Existing Products  Newness in Legal Terms  Newness from the Company’s Perspective  Newness from the Consumer’s Perspective 2  Line Extension: Low risk additions of SKU’s – usually new size, new flavor, new aroma – viewed as incremental improvements on existing products  Significant jump in innovation: Produce significant competitive advantage – launch of CD, DVD, digital camera  True innovations: telephone, computers, automobiles Figure 10-2: Consumption effects define newness  Continuous innovation: same as line extensions. Marketing relatively easy (ex. 3D televisions). Broad distribution  Dynamically continuous innovation: same as significant jump in innovation & technology. Not difficult to comprehend (ex. digital cameras – a lot of things that have changed). Teaching component must be built within marketing. Requires minor changes in consumer behavior.  Discontinuous innovation: Consumers have to learn new consumption patterns. (ex. speech recognition software). Risky. Marketers have to sell really hard on the benefits. Difficult to do. Provide lots of usage information, personal selling, and very expen
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