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Chapter 9 - Developing New Products and Services
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• One internal approach for getting ideas within the firm is to train employees in the
art and science of asking specific, probing questions.
• The goal in generating new-product ideas and strategies is to move from:
• Open innovation is an idea generation process that:
• There are several sources generate new-product ideas.
1. Suggestions from Employees and Friends.
a. Employees should be encouraged to suggest new-product ideas through
[Video 9-2: Life is Good]
2. Customer and Supplier Suggestions.
a. To discover new-product ideas, firms ask their:
b. Business researchers emphasize that firms must actively involve customers
c. This often means focusing on what the new product will actually do for them
d. Look outside the firm for solutions to problems rather than insisting
e. Example: P&G’s Tide Pods.
Chapter 9 - Developing New Products and Services
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• Had high consumer satisfaction ratings for a new laundry product.
• Redesigned the packaging because children thought the pods were candy.
[Video 9-3: P&G’s Tide Pods Ad]
f. Crowdsourcing involves generating insights leading to actions based on
massive numbers of people’s ideas.
3. Research and Development Laboratories.
a. A major source of new products is a firm’s own R&D laboratories.
b. Professional R&D “innovation labs” outside the organization:
• Are sources of open innovation.
• Provide new-product ideas through brainstorming and other idea
generation techniques.
• Example: IDEO.
– Is the most prolific and influential design firm in the world.
– Has created thousands of new products for its clients.
– Its brainstorming sessions can generate 100 new ideas in an hour.
– Uses “design thinking,” which…
– Its designs include:
* Apple mouse.
4. Competitive Products. A firm can purchase and use competitors’ products to:
Chapter 9 - Developing New Products and Services
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Education.
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c. Example: General Motors referenced Tesla for its new Chevrolet Bolt.
5. Smaller Firms, Universities, and Inventors. Visionaries outside the firm can be
a source of new-product ideas.
a. Smaller, nontraditional firms.
• Small technology firms and even small, nontraditional firms in adjacent
b. Universities.
• Their technology transfer centers often partner with other for profit
c. Inventors.
• Lone inventors and entrepreneurs often come up with brilliant new-
d. Crowdfunding.
• Is a 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.
* It initially sold for $150. Eventually, Pebble became insolvent and
its assets were acquired by Fitbit
C. Stage 3: Screening and Evaluation
Screening and evaluation is the stage of the new-product process that internally and
externally evaluates new-product ideas to eliminate those that warrant no further
effort.
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1. Internal Approach.
a. Internally, the firm’s employees:
b. When screening new-service ideas, service-dominated organizations need to:
• Ensure that employees have the commitment and skills to…
c. This is the essence of customer experience management (CEM), which is
the process of managing the entire customer experience within the company.
d. Marketers must consider employees’ interactions with customers so that the
new services are:
• Consistently delivered and experienced.
2. External Approach.
a. Concept tests are external evaluations with consumers that consist of
preliminary testing of a new-product idea rather than an actual product.
b. These tests are more useful with:
c. Concept tests rely on written descriptions of the product but may be
augmented with sketches, mockups, or promotional literature.
d. Questions asked during concept testing are:
• How does the customer perceive the product?
Chapter 9 - Developing New Products and Services
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MARKETING MATTERS
Was the Google Glass Half Full or Half Empty?
How did the Google Glass morph from being one of Time Magazine’s best inventions of
2012 to an embarrassing flop in 2015?
• Google Glass resembled a pair of eyeglasses with a small screen visible to the wearer.
• Prototypes were sold to 8,000 “Glass Explorers” in 2013 for $1,500 with the intent to
collect feedback and then update/fix problems before a full launch.
Chapter 9 - Developing New Products and Services
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LEARNING REVIEW
9-7. What is the new-product strategy development stage in the new-product process?
Answer: New-product strategy development is the first stage of the new-product
process that defines the role for a new product in terms of the firm’s overall objectives.
9-8. What are the main sources of new-product ideas?
Answer: Many firms obtain ideas externally using open innovation, in which an
organization finds and executes creative new-product ideas by developing strategic
relationships with outside individuals and organizations. Some of these sources include
9-9. How do internal and external screening and evaluation approaches differ?
Answer: In internal screening, company employees evaluate the technical feasibility of
new-product ideas to determine whether they meet the objectives defined in the new-
D. Stage 4: Business Analysis
• Business analysis is the stage of the new-product process that specifies the
Chapter 9 - Developing New Products and Services
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• The business analysis stage assesses the total “business fit” of the proposed new
product with the company’s mission and objectives:
a. From whether the product can be economically developed and
• This process requires:
a. Assessments of the marketing and product synergies related to the company’s
b. Detailed financial projections with respect to:
c. Must answer the following questions:
• Will the new product require a lot of new machinery to produce it or can it
be produced using the unused capacity of existing machines?
E. Stage 5: Development
• Development is the stage of the new-product development process that turns the
idea on paper into a prototype.
• This results in a demonstrable, producible product that:
a. Is actually manufactured.
• Example: Google’s driverless car.
a. This is an extreme example of the complexity of the Stage 5 development
process for a durable consumer good.
Chapter 9 - Developing New Products and Services
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F. Stage 6: Market Testing
• Market testing is the stage of the new-product process that exposes actual
products to prospective consumers under realistic purchase conditions to see if
they will buy.
• Test Marketing:
1. Standard Test Markets.
a. A company develops a product and then attempts to sell it through normal
distribution channels in a number of test markets.
b. Test market cities must:
• Be demographically representative of the product’s target market.
c. Depending on results of a test market, companies will: (1) if results do not
2. Controlled Test Markets.
a. A controlled test market involves contracting the entire test program to an
outside service. It:
• Arranges for shelf space on retailers’ shelves.
b. IRI Group:
Chapter 9 - Developing New Products and Services
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3. Simulated Test Markets.
a. Simulated (or laboratory) test markets (STM) are a technique that simulates a
full-scale test market but in a limited fashion.
b. Simulated test markets are often run in shopping malls, where:
• Consumers are questioned to identify those who use the product class.
• Willing participants are questioned to identify:
c. Qualified persons are then shown TV or print ads for the test product along
with competitors’ advertising.
G. Stage 7: Commercialization
• Commercialization is the stage of the new-product process that positions and
launches a new product in full-scale production and sales.
• Is the most expensive stage for most new products.
• A firm may permanently halt the new-product launch:
1. The Boeing 787 Dreamliner Experience.
a. In 2004, Boeing announced the Boeing 787 Dreamliner, which would:
Chapter 9 - Developing New Products and Services
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c. With all the new technology in the Dreamliner, technical nightmares
appeared—even after extensive testing.
• Its wings, now made with plastic-reinforced carbon fiber instead of
aluminum, proved difficult to produce and attach to the fuselage.
d. The Wall Street Journal gave the best new-product lesson from the Boeing
2. Burger King’s French Fries: The Complexity of Commercialization.
a. McDonald’s French fries are the gold standard against which all other fries in
the fast-food industry are measured.
b. Burger King decided to take on McDonald’s fries.
• It spent millions of R&D dollars developing a whey/starch-coated fry
d. In late 2013, Burger King responded with its “Satisfries” as the fries in kids
meals.
• Intended to help address concerns about nutritious for and obesity in
children.
Chapter 9 - Developing New Products and Services
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LEARNING REVIEW
9-10. How does the development stage of the new-product development process involve
testing the product inside and outside the firm?
Answer: Development is the stage of the new-product process that turns the idea on
paper into a prototype, which results in a demonstrable, producible product that can be
9-11. What is a test market, and what are the kinds?
Answer: Test marketing involves offering a product for sale on a limited basis in a
defined area for a specific time period. The three main kinds of test markets are: (1)
9-12. What is the commercialization of a new product?
Chapter 9 - Developing New Products and Services
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APPLYING MARKETING KNOWLEDGE
1. Products can be classified as either consumer or business products. How would you
classify the following products? (a) Johnson’s baby shampoo, (b) a Black & Decker
two-speed drill, and (c) an arc welder?
Answers:
a. Johnson’s baby shampoo. A consumer product.
2. Are Nature Valley Granola bars and Eddie Bauer hiking boots convenience,
shopping, specialty, or unsought products?
Answers:
3. Based on your answer to question 2, how would the marketing actions differ for each
product and the classification to which you assigned it?
Answers:
a. Nature Valley Granola bars. Since this item is likely to be available to consumers
wherever food and snack products are sold, distribution of this product would include
4. In terms of the behavioral effect on consumers, how would a computer, such as an
Apple iMac, be classified? In light of this classification, what actions would you
suggest to the manufacturers of these products to increase their sales in the market?
Answers:
a. Classifying personal computers. When first introduced, the personal computer was a
Chapter 9 - Developing New Products and Services
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5. What methods would you suggest to assess the potential commercial success for the
following new products? (a) a new, improved ketchup, (b) a three-dimensional
television system that took the company 10 years to develop, and (c) a new children’s
toy on which the company holds a patent.
Answers:
a. New, improved ketchup. In the test marketing of a new ketchup, use of a purchase
laboratory might be the most advantageous method to assess the product’s likely
6. Concept testing is an important step in the new-product process. Outline the concept
tests for (a) an electrically powered car and (b) a new loan payment system for
automobiles that is based on a variable interest rate. What are the differences in
developing concept tests for products as opposed to services?
Answers:
a. Electrically powered car. The concept test for an electrically powered car would
Chapter 9 - Developing New Products and Services
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BUILDING YOUR MARKETING PLAN
In fine-tuning the product strategy for your marketing plan, do these two things:
1. Develop a simple three-column table in which (a) market segments are in the first
2. In the third column of your table, write ideas for specific new products for your
business in each of the rows in your table.
Answers:
(a) MARKET SEGMENTS
(b) POINTS OF DIFFERENCE
(c) NEW PRODUCT IDEAS
Helping with Common Student Problems
In writing their marketing plans, students often have a myopic view of their “product
Chapter 9 - Developing New Products and Services
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TEACHING NOTE FOR VIDEO CASE VC-9
GoPro: Making All of Us Heroes With Exciting New Products
[Video 9-4: GoPro Video Case (kerin.tv/cr8e/v9-4)]
Synopsis
This case describes the new product development process at GoPro, Inc., a producer of
action cameras and video-editing software. The company’s product line includes a variety of
The case provides students with an opportunity to understand how each stage of the new
product development process—strategy development, idea generation, screening, business
Teaching Suggestions
A useful way to begin this case is to discuss the various situations where students take
photos or a video—at sporting events, during a party, with friends, to capture ceremonies, etc.
Some students will also mention that they take “selfies.” Use that example to ask:
1. “What are important attributes of cameras that you use to take photos or videos?” Should
they be portable? Waterproof? High definition capable? Inexpensive?
These questions then lead to the questions posed in the case.
Answers to Questions
1. What are the points of difference, or unique attributes, for GoPro products?
Answer:
The history of the company emphasizes that the first unique attribute was that the products
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2. What are GoPro’s primary target markets? How does content marketing influence
these markets?
Answer:
The original target market was surfers, and shortly after that the target market expanded to
include extreme sports enthusiasts from a wide variety of sports. GoPro’s target market
3. Describe the new product development process used at GoPro. What are the
similarities and differences to the process described in Figure 9-4?
Answer:
The new product development process at GoPro follows a sequence of steps to ensure that
they have the best product mix for the marketplace. The steps are very similar to the stages
described in Figure 9-4:
a. New-Product Strategy Development. The GoPro strategy is to take advantage of the
Chapter 9 - Developing New Products and Services
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g. Commercialization. GoPro develops a go-to-market plan for all product releases and
product launches. Digital marketing and social media play a huge role in these plans.
4. Which of the eight reasons for new product failure did GoPro avoid to ensure the
success of GoPro’s products?
Answer:
The success of GoPro products suggests that they have avoided many of the reasons for
new-product failure. The case explicitly addresses how they avoid several of the reasons,
including:
a. Insignificant point of difference. Waterproof, mountable, and versatile are key points
of difference.
5. Identify one new product idea you would suggest that GoPro evaluate.
Answer:
Students will generate many ideas as a response to this question, such as:
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Epilogue
Recently, GoPro’s growth has slowed as competitors such as Sony, Garmin, and Polaroid
entered the action-camera market with lower-priced alternatives. In response GoPro reduced the
price of its Session camera and had to lay off some of its employees. Woodman acknowledges
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ICA 9-1: IN-CLASS ACTIVITY
Focus Group for a Smartwatch
Learning Objective. To have 6 to 8 students participate in a focus group in front of class
to evaluate new product concepts in front to help the class learn how to run them effectively.
Definition. The following marketing term is referred to in this ICA:
Nature of the Activity. To (1) have the instructor moderate a focus group of students to
Estimated Class Time and Teaching Suggestions. About 20 minutes, moderated by the
instructor in front of the class.
Materials Needed.
Steps to Teach this ICA.
4. Give students this background mini-lecture on smartwatches:
“A smartwatch is a computerized wristwatch with more uses than just keeping time.
Smartwatches are part of a new category of technology-based products known as
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5. Give the following mini-lecture about the Pebble smartwatch:
“Eric Migicovsky, the inventor of the Pebble Smartwatch, began working on it in
2008. When the final prototype was ready in 2012, Migicovsky needed financing and
6. Ask the class these two broad questions about focus groups:
• Question 1: (a) Why are focus groups used? (b) How are focus groups
conducted?
Answers:
Marketers use a variety of primary research methods (experiments, interviews,
• Question 2: What are some questions you would want answers to as a result of
conducting a focus group on a company’s new smartwatch?
7. Recruit 6 to 8 students for the focus group on smartwatches. Seat them in the front
8. When all have been seated, welcome the focus group participants by thanking them
9. Tell the focus group that the only rules are (1) no opinion or idea is to be thought of
