chapter 8 group c

7/27/2019 Chapter 8 Group C

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Chapter 8

Group C

Nina Mols

Irma SefrintaMaartje Slot

Mai Ngan Ha


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Essence

Developing new products and services

Dimensions of a product

The core of products and benefits Role of product design

Innovation and evolution of markets

New products


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1 Understand the three objectivesin

managing new product development

(NPD).Product performance Refers to the extent to which a product meets its

customer-based performance specifications orhow well a product is rated in the eyes of thecustomer.

Speed to market

Is measured as the time which elapses betweenan unsatisfied need appearing in the market anda product being made available to a customer tosatisfy this need.


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1. Continue

Product cost

Refers to the total cost of delivering the

product to the customer. A product with a low

manufactured cost but a high marketing cost

may still be a failure.

In designing and developing new product all

three criteria must be fulfilled.


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2 Outline how the core benefit is

augmentedand developed into a

commercially viable product.Core benefit

First and central dimension

Involves the physical appearance of theproduct, its quality and its ability to satisfy

user needs including functional utility.

Allows customers to solve problems andsatisfy basic needs.


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2. Continue

Convert core benefit into generic or basic version.

Generic product concepts evolve with time.

Are easy to recognize. The names by which they

are known immediately convey a sense of

recognition for most people

A race horse

A bicycle

A cup

A hair cut


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2. Continue

Expected products

Generally reflects the minimum acceptablestandards in a particular product market.

Augmented product

Additional benefits and service that help to

distinguish the companys product from thoseof competitors and form the basis for productdifferentiation.


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2. Continue

Product differentiation allows the organization

to segment the marketone segment that

competes on the basis of augmented products

and another which competes on the basis of

the expected product.


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2. Continue

Product differentiation is related to the image

in the market of the organizations products

and its ability to charge a price premium.

Potential product

Refers to the evolutionary process throughwhich the product may pass.


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2. Continue


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Objective 3 Trace the role played by product design

in NPD, particularly in regard to product packaging

Product design means searching for a set of key

features or appeals that are special or even

unique to the product or customer group

It is considered as the designation of the key

benefits the product is to provide, the

psychological positioning of these benefits versus

competitive products, and the fulfillment of theproduct promises by physical features


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Product Design and Quality

Quality is what the customer thinks it is, anddesign contributes to it

Quality contributes to customer satisfactionbut the organization must also benefit fromproviding quality products and services

Next Slide : Example of integration betweendesign and quality in product development

Objective 3 continue . . .


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Special position of packaging in product design

Prepackaging can make direct contact with

customers through the medium of the package,

creating images and appeals to stimulate purchase

Design image product = the organization attempts to

preserve that image for as long as possible to provide

assurance to customers that a consistent level of

quality is being delivered Packaging is not just in its protective role but as a

vehicle to carry information and as a way to promote

the product through the creation of a unique image



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Three factors contribute to image formation:

the outline design of the package

the use of strong color

the overall shape



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Promotional advantages which stem fromeffective design, shape and color = it helps toidentify products especially at point of purchase.

The advertising copy on the package lasts as long

as the product remains in the package. For some products the package is the only way to

differentiate the product contained.

In photocopying paper, for example, one brand isconsidered as good as another, so the packagemay be used to differentiate one supplier fromanother.



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Objective 4 Highlight the special nature of high

technology products

Rapidly change industry Focus should be on the customer benefits and

problem solving

Depend on how well the organization anticipates

future requirements that customers may not be ableto articulate in the present

Says Law (the supply of a product can create its owndemand) appears right on target

Example : Cell phone, before its introduction, it isunlikely that conventional consumer research studieswould have indicated a need or want for suchproducts.


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Objective 5 Describe the process of diffusion and

adoption of innovation at macro and micro level

Innovation = The adoption of a new idea, productor process which is prospectively useful

Diffusion is the process by which a new idea or

new product is accepted by the market Adoption is similar to diffusion except that it

deals with the psychological processes an

individual goes through, rather than an aggregatemarket process


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The greater the perceived complexity of the

innovation, the slower the rate of adoption

Providing the innovation in small quantities, if that ispossible, may reduce risk and encourage product

trial and adoption If the customer can observe the benefits of the

innovation, it is more likely to be adopted;

Product innovations that can be easily and frequently

communicated through the media are likely to beadopted much more rapidly than innovations whichrequire strong sales and extensive merchandisingsupport.



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Macro Level Diffusion

Generally follows a S-shaped pattern

relate the diffusion of an innovation to classifyadopters into categories according to when they first

try the product that consist of five stages



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Innovators are the first customers to adopt a new product.

Venturesome, willing to take risks; they may be outwardlooking, communicative, and sometimes thought of associally aggressive, and involved in many networks ofpeople.

Customers in this category form only a small proportion ofthe total population in the market



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Early adopters enjoy the prestige and respect thatearly purchasing of an innovation brings.

They tend to be opinion leaders, who influenceothers through word of mouth to purchase.

This group represents larger proportion of society



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The mass market for a product is divided into two customer groups.

Early majority customers are generally thought of as having status withintheir social class and are gregarious, communicative and attentive tosources of information.

Represent a large proportion of the total population.

Late majority customers, also a large part of the total population, tend tobe less cosmopolitan and responsive to change

Tend to be less well off, older and usually belong to one of the lowersocioeconomic groupings.



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The laggards may be a relatively substantial proportion of thepopulation

Tend to be price conscious, suspicious of novelty and change,have low incomes and are conservative in most of theirbehavior.

Most products have reached the maturity stage of the life cycle,

i.e. a saturated market, before being purchased by laggards.



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Micro Level Diffusion

Potential buyers are viewed as passing through anadoption process for the product or service that results in atrial and eventually may culminate in a purchase

It involves six stages



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awareof a product or brand when they learn of its

existence but do not have any further information the customer takes an interestin the product and is

motivated to seek information

evaluatethe product and the customer decides

whether to try it



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At the trialstage the customer purchases the product to

test it. Adoptionis said to have occurred when the customer uses

the product on a regular basis.

During the confirmationstage the buyer seeks

reinforcement of the adoption decision but may reverse itif for any reason a dissonance arises.



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Products are considered to be relatively easy toadopt if they:

are compatible with existing lifestyles

are relatively unimportant in total purchases

are suitable for mass advertising anddistribution

are consumed quickly

are easy to usecan be tried in small quantities

have desirable attributes which are obvious



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6 Outline the NPD processand specify the nature and

significanceof each of the stagesin the process.

Process of bringing new products to the

market can be very risky and often involves

large investments of money and time

Calculating cost: R&D, plant & equipment,

warehousing & distribution, packaging &

advertising development, launch &

promotional support

NPD process can be divided into six stages

Figure 8 7: Process of new product development


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Figure 8.7: Process of new product developmentNew product

development strategy

Commercial feasibilityTechnical feasibility Research and development

Market research

Commercialisation

IdeasgenerationrefinementScreening

Physical productdesign, packaging &

Performance

Business and markets plan


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1. Idea generation and screening

Involves a continuous search for new product opportunities

Customers are the best source of new ideas, followed bycompetitors and the sales force

Refine the new concepts/ideas and screen them using criteria:

product features, market opportunities, competitive situation,organization capability, availability of finance

Further stages of refinement: Identity of market segment

Product description

Technical features

Customer benefits

Competitive advantage

Manufacturing process to be used

O f


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2. Concept development and testing

Commercial feasibility study: judge if the new idea proposed iscommercially viable Financial projections

Market analysis

Sales projections

Estimates of profit margins

Likely costs

Technical feasibility study: determine if the appropriate technicalrequirements and standards can be met

Produce designs samples for quantitative research

Possibility of making mistakes: Not proceed with a new product development idea that is taken up

successfully by a competitor

Proceed with an idea which turns out to be a failure

6 O tli th NPD d if th t d


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3. Business and marketing analysis

In order to produce a marketing plan

Financial and sales projections

Estimates of profit margins Development costs

Detailed description of target market

Positioning of new product

Likely market shares

Marketing mix specified



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4. Product market testing

Product is developed and tested

Functional tests, selected consumer tests are

administered Two main activities:

Deciding appropriate packaging requirements, design,test of performance

Product design, technical and production factorsinvolved in production planning and development ofsample product



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5. Physical product design, packaging &

performance

Product and the proposed mix of marketing

activities are introduced into authentic buyersettings to test product acceptance andmarket size

Quantitative research through consumersurveys and interviews

Revisions are possible at this stage



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6. Commercialization of a new product

Contract for manufacturers/build or rent manufacturing site

Launch the product in the market Timing

Geographic segments to be served

Target customer groups Introductory marketing strategy

4 criteria to evaluate new product development ideas Prospects for sales and profits

Capital or investment cost associated with the new venture

Competitive feasibility Strategic desirability

7 Dra attention to the danger of NPD


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7 Draw attention to the danger of NPD

myopia and avoid the various traps in newproduct development.

New product development myopia

Understanding customers needs is a costly

and inexact process

Even if customers know what they want,

transferring that information is difficult

Pressure for short-term returns and speed to

market has led to abandon efforts to exactly

understand what products customers want


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7. Draw attention to the danger of NPD myopia and avoid the various

traps in new product development.

Competitivedelusion

Marketing

analysis and

strategy

Marketscope

CapabilityIllusory

innovations

New product

development traps



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Traps in new product development

1. Competitive delusion: companies believe

their approach is right and that they can

capture a large share of the market without

much opposition

adopt a roll-out sequence through a series of

smaller test markets first before going nationalor tackling large international markets



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2. Market scope: organization adapts an overly

restricted market scope

design the product in such a way that without

heavy modifications, it can be subsequently

introduced into wider markets



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3. Capability: weak companys competence in

the area and cost structure

do not attack market leaders, if the company

does not have a distinct competence in a

number of areas

(cost leadership, quality or access to distribution

outlets)



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4.Illusory innovations: develop products based

on technology push which have no real points of

superiority

sufficient research and testing beforehand



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5. Weak marketing analysis and incorrect

marketing strategy: inadequate market research

and sales projections are overly optimistic

sufficient research and testing beforehand

Whats new


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Whats new

Core benefit of the products: generic

product, expected product, augmentedproduct, potential product.

Role of product design; packaging in product

design

Position of high technology products

Process of new product development; traps

in new product development


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Applicable to the project

Product design and packaging: Even though

Aanenuitbesteden provide online service but

they still can pay attention to the design of

their website or the design of the brochure.

Applying new technology on product

innovation: improving the tendering database

*Since Aanenuitbesteden does not plan to develop new product, there arenot a lot for applicable

!


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Quiz!

1. What is one of the characteristics to define if

products are considered to be relatively easy

to adopt:

A. Compatible with existing lifestyles

B. Cheap

C. Totally unique in the market

D. Having a good brand image


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2. How many stages are there in the new product

development process:

A. More than 7B. 6

C. 5

D. 4

E. 3

F. 2

G. 1

1. New idea/Concept generation and screening

2. Development and testing of new idea/concept

3. Business and marketing analysis4. Product development and testing

5. Test marketing

6. Commercialization

d l d


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3. In order to evaluate new product

development ideas, how many important

criteria are there (as mentioned in the book) ?A. 3

B. 5

C. 2D. 4

1. Prospects for sales and profits

2. Capital or investment cost associated with the

new venture

3. Competitive feasibility

4. Strategic desirability


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4. Competitive delusion, Market Scope,

Capability, Marketing Analysis and Strategy,

Illusory innovation are the traps in new productdevelopment

True or False

chapter 8 group c

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