New Product Development

Introducing New market offerings

Marketing Framework

New Products

Companies seek to improve their current products for the following reasons: a simple point of corporate pride to be consistent with an innovative

image as an effort to better satisfy current

customers or attract new customers to stave off competition

Discussion Questions

Can you name any “new to the world”

products?

Can you name any “incrementally new”

products?

Categories of New Products

New to the World

Additions

Improvements

Repositionings

Cost reductions

The Innovation of Chotukool

Factors That Limit New Product Development

Shortage of ideas Fragmented markets Social and governmental constraints Cost of development Capital shortages Faster required development time Shorter product life cycles

New-Product DevelopmentReasons for new product failure

Which of the following is not a reason that a new product might fail?

1. The product is priced too high.2. The product is poorly designed.3. The estimated market for the product

is too large.4. All of the above are reasons that a new

product might fail.

Which of the following is not a reason that a new product might fail?

1. The product is priced too high.2. The product is poorly designed.3. The estimated market for the

product is too large.4. All of the above are reasons that a

new product might fail.

New-Product Development Process

Major Stages in New-Product Development

New-Product Development Decision Process

What is a Venture Team?

A venture team is a cross-functional group charged with developing a specific product or business.

Criteria for Staffing Venture Teams

Desired team leadership style Desired level of leader expertise Team member skills and expertise Level of interest in concept Potential for personal reward Diversity of team members

Ways to Find Great New Ideas

Run informal sessions with customers Allow time off for technical people to

putter on pet projects Make customer brainstorming a part of

plant tours Survey your customers Undertake “fly on the wall” research to

customers

More Ways to Find Great Ideas

Use iterative rounds with customers Set up a keyword search to scan trade

publications Treat trade shows as intelligence

missions Have employees visit supplier labs Set up an idea vault

Drawing Ideas from Customers

Observe customers using product

Ask customers about problems with products

Ask customers about their dream products

Use a customer advisory board or a brand community of enthusiasts to discuss product

Idea Generation: Creativity Techniques

Attribute listing

Forced relationships

Morphological analysis

Reverse assumption analysis

New contexts

Mind mapping

Lateral Mapping

Gas stations + food Cafeteria + Internet Cereal + snacking Candy + toy Audio + portable

Idea Screening- Forces Fighting New Ideas

Source: With permission of Jerold Panas, Young & Partners Inc.

Concept Development and Testing

Concept Development-Product and Brand Positioning

Concept Testing

Communicability and believability Need level Gap level Perceived value Purchase intention User targets, purchase occasions,

purchasing frequency

Conjoint Analysis- Measures Consumer preferences for alternative product concepts

Utility Functions Based on Conjoint Analysis

Marketing Strategy Development-Issues to be addressed in 3 stages1. TG MKT Size, Structure, behavior AND

Planned Pdt Positioning, sales, Market Share and profit goals for first few years

2. Panned Price, Dtbn Strategy and Mktg budget for first year

3. Long run sales and profit goals and mktg-mix strategy over time

Product Life-Cycle Sales for 3 Types of Products

Projected Five-Year Cash Flow Statement (in Rupees Million)

Prototype Testing

Alpha testing

Beta testing

Market testing

Consumer Goods Market Testing

Sales-Wave Research Simulated Test Marketing Controlled Test Marketing Test Markets

Test Market Decisions

How many test cities? Which cities? Length of test? What information to collect? What action to take?

Which of the following is not a form of test marketing?

1. Standard test markets2. Controlled test markets3. Simulated test markets4. Perceptual test markets

Which of the following is not a form of test marketing?

1. Standard test markets2. Controlled test markets3. Simulated test markets4. Perceptual test markets

Some of the drawbacks of ________ test markets are that they can be very costly, and they can give competitors a chance to look at the company’s new ideas.

1. standard2. controlled 3. simulated4. Internet

Some of the drawbacks of ________ test markets are that they can be very costly, and they can give competitors a chance to look at the company’s new ideas.

1. standard2. controlled3. simulated 4. Internet

Commercialization

Decisions

When? Timing Where? Geographic Strategy To Whom? Target Market

Prospects How? Introduction Market Strategy

Timing of Market Entry

First entry Parallel entry Late entry

What is Adoption?

Adoption is an individual’s decision to become a regular user of a product.

Stages in the Adoption Process

Awareness

Interest

Evaluation

Trial

Adoption

Adopter Categorization on the Basis of Relative time of Adoption

Source: Tungsten, http://en.wikipedia.ord/wiki/Everett_Rogers. Based on Rogers, E. (1962) Diffusion of Innovations. Free Press, London, NY, USA.

Characteristics of an Innovation

Relative advantage Compatibility Complexity Divisibility Communicability

The Product Life CycleFour stages:

1. Introduction

2. Growth

3. Maturity

4. Decline

Customer Types

Stage I: Introduction

Slow sales growth Few competitors Innovative customers Nonexistent profit

Stage I: Introduction- Strategic Focus

Expand market Increase product awareness

Stage II: Growth

Rapid market acceptance Substantial profit improvement Increasing competition Mass Market Profits Peak?

Stage II: Growth- Strategic Focus Market penetration Build brand preference

Stage III: Maturity Slow down in sales growth Profit peaks (if didn’t in

growth) Mass market Many competitors

Stage III: Maturity-Strategic Focus Defend market share! Retain brand loyalty Product differentiation

Stage IV: Decline

Sales decline Customers are laggards May be fast or slow Low profits Competitors decline

Extending the PLC Increase frequency of use by present

customers Find new uses Increase number of users Change package size/label Encourage trial

Practical Problems of PLC

Hard to identifywhich stage of the

PLC the product is in

Hard to pinpointwhen the product

moves to next stage

Hard to identifyfactors that affect

product’s movementthrough stages

Hard to forecastsales level, length of

each stage, andshape of PLC

Strategy is both acause and result of

the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

LowLow

High cost per customerHigh cost per customer

NegativeNegative

Create product awareness and trialCreate product awareness and trial

Offer a basic productOffer a basic product

Use cost-plus formulaUse cost-plus formula

DistributionDistribution Build selective distributionBuild selective distribution

PromotionPromotion Heavy to entice product trialHeavy to entice product trial

Summary of Characteristics, Objectives, & Strategies

Introduction Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Rapidly risingRapidly rising

Average cost per customerAverage cost per customer

RisingRising

Maximize market shareMaximize market share

Offer extension, service, warrantyOffer extension, service, warranty

Penetration strategyPenetration strategy

DistributionDistribution Build intensive distributionBuild intensive distribution

PromotionPromotion Reduce to take advantage of demandReduce to take advantage of demand

Summary of Characteristics, Objectives, & Strategies

Growth Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

PeakPeak

Low cost per customerLow cost per customer

HighHigh

Maximize profits while defending market share

Maximize profits while defending market share

Diversify brand and models Diversify brand and models

Match or beat competitorsMatch or beat competitors

DistributionDistribution Build more intensive distributionBuild more intensive distribution

PromotionPromotion Increase to encourage brand switchingIncrease to encourage brand switching

Summary of Characteristics, Objectives, & Strategies

Maturity Stage of the PLC

Maturity Stage of the PLC

Modifying the Market: Increase the consumption of the current product.

How? Look for new users and market

segments Reposition the brand to appeal to

larger or faster-growing segment Look for ways to increase usage

among present customers

Maturity Stage of the PLC

Modifying the Product: Changing characteristics such as quality, features, or style to attract new users and to inspire more usage.

How? Improve durability, reliability, speed,

taste Improve styling and attractiveness Add new features Expand usefulness, safety, convenience

Maturity Stage of the PLC

Modifying the Marketing Mix: Improving sales by changing one or more marketing mix elements.

How? Cut prices Launch a better ad campaign

New ads and promotions to reposition and revitalize mature product.

Move into larger market channels Offer new or improved services to

buyers

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

DecliningDeclining

Low cost per customerLow cost per customer

DecliningDeclining

Reduce expenditures and milk the brandReduce expenditures and milk the brand

Phase out weak itemsPhase out weak items

Cut priceCut price

DistributionDistribution Selective: phase out unprofitable outletsSelective: phase out unprofitable outlets

PromotionPromotion Reduce to minimum levelReduce to minimum level

Summary of Characteristics, Objectives, & Strategies

Decline Stage of the PLC

________ is a review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives.

1. Market strategy development2. Product development3. Business analysis4. Forecasting

________ is a review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company’s objectives.

1. Market strategy development2. Product development3. Business analysis4. Forecasting

The systematic search for new-product ideas is called ________.

1. idea generation2. idea search3. idea screening 4. concept development

The systematic search for new-product ideas is called ________.

1. idea generation2. idea search3. idea screening 4. concept development

Once the new product ideas have been screened, the next step in the new product development process is ________.

1. marketing strategy2. concept development and testing3. product development4. none of the above

Once the new product ideas have been screened, the next step in the new product development process is ________.

1. marketing strategy2. concept development and testing3. product development4. none of the above

Which of the following is not a stage in the product life cycle (PLC)?

1. Idea screening2. Growth3. Maturity4. Decline

Which of the following is not a stage in the product life cycle (PLC)?

1. Idea screening2. Growth3. Maturity4. Decline

Which stage of the product life cycle (PLC) is characterized by slow growth because the product has achieved acceptance by most of its potential buyers?

1. Introduction 2. Growth 3. Maturity 4. Decline

Which stage of the product life cycle (PLC) is characterized by slow growth because the product has achieved acceptance by most of its potential buyers?

1. Introduction2. Growth3. Maturity 4. Decline

________ tend to grow slowly, remain popular for a while, and then decline slowly.

1. Fads2. Styles3. Fashions4. Designs

________ tend to grow slowly, remain popular for a while, and then decline slowly.

1. Fads2. Styles3. Fashions4. Designs

Marketers should consider public policy issues involving product safety, environment, and warranties. This is referred to as ________.

1. social responsibility2. positioning3. marketing mix4. commercialization

Marketers should consider public policy issues involving product safety, environment, and warranties. This is referred to as ________.

1. social responsibility2. positioning3. marketing mix4. commercialization