ELC 310

Day 21

Agenda

• Third Student Case – Terra Lycos by Karen – E-mail presentations at least 15 min before class so I may

upload to web server

• Case studies are tied to proceeding chapters, make sure you discuss the connection

• Discussion/lecture New Products

Rest of Schedule

• Nov 27– Terra Lycos

• K. Pelletier– New Products

• Nov 30– MarketSoft Corporation

• L. Dubois – Communication and Selling

• Dec 4– OSRAM Sylvania

• G.Sumyla– Pricing and Distribution

• Dec 7– Logistics.com A & B

• G. Nagradic – Build a Trusting Relationship with

Customer

• Dec 11– Travelocity

• K. Pelletier

– The Future of Digital Marketing

• Dec 14– Citibank Online

• L. Dubois

– Written Case Study Due

• Dec 20 @ 3PM– Quiz #4– Case Study Presentations Due

Overview

• Introduction

• Preventing new product Failures

• Proactive Product development

• Reactive Product development

• Market research techniques

• Product Life Cycles

Introduction

• New product development is necessary for continued profitability

• Some numbers– 74% of new products are weeded out before

reaching the marketplace – 41% new product failure in marketplace– 26%*41% = 10.66% success rate – 49.2% of sales of leading companies are from

new products

Digital failures

• 90% of Internet companies failed in the marketplace– Vs 41% for new products– Problem was with new product selection before

marketplace• All Internet products went to market

– Failed to • Screen, test and do design work before launch

• Dot Coms were very expensive concept test.

Preventing new product failure

• Reasons– Market too small– Poor positioning– Little benefit relative to the competition– Not New/Not different (enough)– Forecasting error– Poor timing– Shift in technology– Change in Customer Tastes

Use a Structured Process

• Systematic process• Poor projects eliminated• Good projects supported• Top 33.3% of companies

use a disciplined project development approach

• 9 step process from elephantX

Opportunity IdentificationMarket definitionIdea Generation

Design Customer needs Sales forecasting Product Positioning Engineering Segmentation Marketing Mix

TestingAdvertising and product testing

Pretest and prelaunch forecastingTest marketing

IntroductionLaunch planning

Tracking the launch

Life Cycle ManagementMarket response analysis

Competitive monitoring and defenseInnovation at maturity

NO

GO

GO

GO

GO

Rep

ositi

on

Harvest

Terminate

NO

NO

Proactive Market Development

• Driven by Marketing Strategy

• Opportunity analysis based on consumer needs

• Generate a few high-potential ideas

Marketing strategy

Opportunity IdentificationR&D MarketingCustomers Acquisitions

DesignSegment PositionProduct Total value

TestEngineeringCustomer

Manage Life Cycle

GO

GO

GO

Terminate

NO

NO

Introduce

NO

NO

GO

Reactive marketing Strategy

• Can Reduce Cost and risks

• Reactions to competitive moves

• Success based on “sensing” ability & quickness

Sense Action

EvaluateOpportunity

Threat

ReactCopy

ImproveDefend

TestFast read

Comparion

Manage Life Cycle

GO

GO

GO

Terminate

NO

NO

Introduce

NO

NO

GO

Which to use

• Prerequisites for Proactive– Strong R&D– Marketing Power– Markets rewards

• Premium products • Pioneers

– Theory T marketing

• Prerequisites for Reactive– Firm is flexible and

agile– Market

• Price is king• No ability to

differentiate products• Products do not require

much experience

– Theory P marketing

Market research techniques for proactive

• Listening In– Lowers costs of

gathering info on customer needs

– Requires monitoring of third party “conversation” with consumers

• Blogs• Forums

– Replace focus groups– Used by GM trucks

• Information acceleration– Used for premarket

forecasting of High tech products

– Prototypes and virtual models

– Measure interactions with virtual models

– Used by Toyota for Prius

Managing Life Cycles

• 4 phases– Introduction– Growth – Maturity – Decline

• Diffusion Theory of Innovation– Adopt then communicate– Slow start followed by rapid increase – Leads to saturation then decline

Marketing actions for Life cycle

• Introduction– Advertising and promotion – Stimulate diffusion of innovation – Increase awareness and positive consumer

acceptance – Preempt competitors – Pricing is key

• Too high slow sale growth but high margins• Too low penetrate market but differs profits

Marketing actions for Life cycle

• Growth– Holding and building market share – Product improvement– More differentiation occurs as competitors enter

market• Maturity

– Competition intensifies prices erode– CAC goes up, loyalty more important

• Decline phase– Milk profits– Start new product