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Lecture 3

MKT 304 Lecture Notes - Lecture 3: New Product Development, Laundry Detergent, Toothpaste


Department
Marketing
Course Code
MKT 304
Professor
Matthew Wilson
Lecture
3

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Products and Services:
What is a Product?
Product: anything that can be offered to a market that may satisfy a want or need.
-Includes tangible objects, events, persons, places, organizations, ideas and.. services.
Services: intangible activities, benefits or satisfaction that do not result in the ownership
of anything.
Companies consider three levels of value their product provides consumers.
-Core customer value: what you really buy.
-An iPhone or connectivity?
-Actual product: turn to core benefit into an actual product.
-iPhone.
-Augmented product: the actual product + additional benefits and services.
Making a Product
When making a product you should:
Start with the core value
Then determine what the actual product will be
Then determine how to augment it
Product Classifications:
Two broad categories: consumer products and industrial/business products.
Consumer products are purchased for personal consumption and include:
o Convenience products: require little effort on the part of the consumer. Ex.)
laundry detergent, toothpaste.
o Shopping: products that consumers research and compare. Often high prices due
to low price sensitivity. Ex.) Furniture, hotel/airfare purchases.
o Specialty: products that consumers will go to lengths to acquire; products that
consumers think are unique. Ex.) Designer clothes.
o Unsought: products that are not sought by the consumer. Often bought out of
need or fear. Ex.) funerals, life insurance.
Industrial Products
o They are purchased for use in conducting business and include:
o Material and Parts: raw materials. Used to create another product or service.
o Capital items: buildings, factories, offices.
o Supplies and Services: paper pens, window cleaning, computer repair. Similar to
the consumer category of convenience items.
New product development strategy
New product development:
o The development of original products, improvements, modifications and new
brands through the firms product-development efforts.
o New product innovation is expensive and risk.
80% of al new products fail or dramatically underperform.

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Idea Generation
Generate as many ideas as possible from:
Internal sources:
o Company employees at all levels
External sources
o Customers
o Competitors
o Distributors and suppliers
o Others (including trade magazines and shows, advertising agencies, marketing
research firms, laboratories and inventors)
Concept Development
Reduce the generated ideas and the good ideas only.
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.
Product concept: detailed version of the new product idea stated in meaningful consumer
terms.
Concept testing:
o Testing new product concepts either via word or picture descriptions or with
physical presentations
o Testing 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 products 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
o Calls for a large investment
o Prototypes must have required functional features and convey psychological
characteristics.
o Prototypes are developed and tested by R&D
Test-Marketing
Product and marketing program are introduced into a realistic market setting
o Not needed for all products
o Provides marketing experience before going to the expense of full introduction.

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Commercialization
Full scale introduction of the product into the market.
Managing New-Product Development
Three elements to success:
Customer centered approach:
Team-based approach:
Systematic approach:
Managing New-Product Development
Three elements to success:
1. Customer centered approach:
a. Focuses on solving customer problems
b. Offers compelling customer value proposition
2. Team based approach:
a. Departments work together (overlapping steps to save time and increase
effectiveness)
3. Systematic approach:
a. Innovation management systems collect, review, evaluate, manage new product
ideas.
Product Life cycle: the course of a products sales and profits in its lifetime.
There are five distinct stages:
1. Product development
2. Introduction
3. Growth
4. Maturity
5. Decline
Stages of PLC
Introduction:
When a new product is launched
Low sales, negative or low profits
High distribution or promotion expenses
Marketing objective is to create product awareness and trial
o Ex: 3d Tvs, 3D printers, electric vehicles
Growth:
Sales climb quickly
Unit manufacturing costs fall
Profits increase
New coopetitors enter the market
Marketing objective is to maximize market growth and market share
o Ex: wearable technologies (fitbit, apple watch)
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