CHALLENGES IN NEW PRODUCT DEVELOPMENT

Shortage in New Product Ideas Fragmented Markets Social and Governmental Constraints High Development Cost Shortage of Cash/Capital Faster Development Time Shorter Product Life Cycle

CAUSES OF NEW PRODUCT SUCCESS

Technological Superiority Easy of Market Entry Competitive Advantage Size and Speed in Market growth Identifying Needs/Wants and Good Timing Effective Promotion/Communication Uniqueness of the Concept/Product Marketing and Managerial Synergy/Team Effort

CAUSES OF NEW PRODUCT FAILURE

Failure in Market Research Findings Overestimated Demand and Size of Market Design Failure Positioning Problem Ineffective Communication/Promotion High Development Cost/ Price Pressure from Competitors Poor Timing

EFFECTIVE ORGANIZATIONAL ARRANGEMENTS

Top Management:
R&D Budget.

Organization for New-Product Development:

Product managers New Product Managers New Product Committee New Product Departments:
R&D.

New Product Venture Team

THE NEW-PRODUCT DEVELOPMENT PROCESS

Idea Generation: Sources of new ideas: Customers needs and wants, scientists and engineers, competitors, sales force and channels, top management, universities and research firms Methods

Focus Group
Attribute Analysis. Brain Storming Problem Inventory Analysis

Idea Screening: Idea manager Idea committee:

DROP-error GO-error

THE NEW-PRODUCT DEVELOPMENT PROCESS

Concept Development and Testing:
Concept development:
Category concepts Product-positioning map Brand positioning map turns into brand concept

Concept testing
Virtual reality.

Customer-driven engineering:
Incorporating customer preferences into final engineering design.

Product & Brand Positioning

(a) Product-positioning map (breakfast market) b) Brand-positioning map (instant breakfast market)

Expensive

High price/oz.

High in calories

Low in calories

Slow

Bacon and eggs Pancakes Hot cereal

Cold cereal

Brand C

Quick

Instant breakfast

Brand B
Brand A

Inexpensive

Low price/oz.

THE NEW PRODUCT DEVELOPMENT PROCESS

Marketing Strategy Development:
Size of market, structure, behavior, market share and short-run profit goals Pricing and distribution strategy Long-run sales and profit goals.

Business Analysis:
Sales, cost and profit projections:
Estimating total sales: First-time sales.

Replacement sales.
Repeat sales. Estimating costs and profits: Cost of goods sold, gross margin, gross contribution, net contribution, discounted contribution and pay back period, break-even analysis, risk analysis.

THE NEW PRODUCT DEVELOPMENT PROCESS

Product Development:
Physical version of the product:
Functional test (alpha testing) Customer test (beta testing)

Measuring consumer preferences:

Rank-order. Paired comparison. Monadic rating.

THE NEW PRODUCT DEVELOPMENT PROCESS

Market Testing:
Consumer-goods market testing:
Trial, first repeat, adoption and purchase frequency:
sales-wave research-trying with no cost to consumer. simulated test marketing.

controlled test marketing.

test markets- reliable forecasts, testing the marketing mix: how many cities. which cities. length of test. what information to learn. what action to take-trial and repurchase rate.

Consumer-Goods Market Testing

Simulated Test Market
Test in a simulated shopping environment to a sample of Sales- consumers.

Controlled Test Market

A few stores that have agreed to carry new products for a fee.

Wave Research
Test offering trail to a sample of consumers in successive periods.

Standard Test Market

Full marketing campaign in a small number of representative cities.

THE NEW PRODUCT DEVELOPMENT PROCESS

Business goods market testing:
Alpha testing
Measure and improve product performance.

Beta testing:
Testing in customers site

Trade shows Dealers showroom.

Commercialization:
Timing:
First entry. Parallel entry. Late entry.

NEW PRODUCT DEVELOPMENT PROCESS

Commercialization (cont.):
Geographical strategy:
Single locality Regional National

Global

Target-market prospects:
Users Nonusers Opinion leaders

Strategic model:
Critical path.

THE CONSUMER ADOPTION PROCESS

Early strategies:
Mass-market approach, Heavy-user target market.

Early adopter theory:

Time laps between exposure and trials. Influence to early adopter:
Media exposure. Early adopter as opinion leader.

Stages in adoption:
Awareness. Interest. Evaluation. Trial. Adoption.

THE CONSUMER ADOPTION PROCESS (CONT.)

Factors influencing the adoption process:
Peoples readiness:
Adopter Categories:

Innovator(2.5%)
Early Adopters(13.5%), Early Majority (34%), Late Majority(34%). Laggards(16%).

Personal Influence:
More important at the evaluation stage, and on late adopters than the early adopters.

Adopter Categorization of the Basis of Relative Time of Adoption of Innovations

34% Early majority 2 1/2% Innovators 13 1/2% Early adopters

34% Late majority

16% Laggards

Time of adoption innovations

INFLUENCING FACTORS TO ADOPTION PROCESS

Characteristics of the Innovation affect rate:
Relative advantage
Compatibility Complexity Divisibility Communicability

Organizations to Adopt Innovation:

Environmental factors Organizational factors: Progressiveness. Size. Pressure.

What is Positioning?
Positioning is the act of designing the companys offering and image to occupy a distinctive place in the mind of the target market.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-18

Value Propositions
Perdue Chicken
More tender golden chicken at a moderate premium price

Dominos
A good hot pizza, delivered to your door within 30 minutes of ordering, at a moderate price

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-19

Competitive Frame of Reference

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-20

Defining Associations
Points-of-parity Points-of-difference (PODs) (POPs) Attributes or benefits Associations that consumers strongly are not necessarily associate with a unique to the brand brand, positively but may be shared evaluate, and believe with other brands they could not find to the same extent with a competitive brand
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 10-21

PODs and POPs

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-22

Establishing Category Membership

This four-in-one entertainment solution from Konica failed to establish category membership

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-23

Conveying Category Membership

Announcing category benefits

Comparing to exemplars

Relying on the product descriptor

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-24

Consumer Desirability Criteria for PODs

Relevance

Distinctiveness

Believability

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-25

Deliverability Criteria for PODs

Feasibility

Communicability

Sustainability

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-26

Examples of Negatively Correlated Attributes and Benefits Low-price vs. High quality Taste vs. Low calories Nutritious vs. Good tasting Efficacious vs. Mild Powerful vs. Safe Strong vs. Refined Ubiquitous vs. Exclusive Varied vs. Simple

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-27

Addressing negatively correlated PODs and POPs

Present separately Leverage equity of another entity Redefine the relationship

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-28

Differentiation Strategies

Product

Personnel

Channel

Image

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-29

Product Differentiation
Product form Features Performance Conformance Durability Reliability Reparability Style Design Ordering ease Delivery Installation Customer training Customer consulting Maintenance
10-30

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

Personnel Differentiation: Singapore Airlines

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-31

Channel Differentiation

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-32

Image Differentiation

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-33

Claims of Product Life Cycles

Products have a limited life Product sales pass through distinct stages each with different challenges and opportunities Profits rise and fall at different stages Products require different strategies in each life cycle stage

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-34

Figure 10.1 Sales and Product Life Cycle

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-35

Figure 10.2 Common Product Life-Cycle Patterns

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-36

Figure 10.3 Style, Fashion, and Fad Life Cycles

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-37

The Pioneer Advantage

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-38

Figure 10.4 Long-Range Product Market Expansion Strategy

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-39

Strategies for Sustaining Rapid Market Growth

Improve product quality, add new features, and improve styling Add new models and flanker products Enter new market segments Increase distribution coverage Shift from product-awareness advertising to product-preference advertising Lower prices to attract the next layer of pricesensitive buyers
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 10-40

Stages in the Maturity Stage

Growth Stable

Decaying maturity

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-41

Marketing Product Modifications

Quality improvements Feature improvements Style improvements

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-42

Marketing Program Modifications

Prices Distribution

Advertising
Sales promotion Services
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 10-43

Ways to Increase Sales Volume

Convert nonusers Enter new market segments Attract competitors customers Have consumers use the product on more occasions Have consumers use more of the product on each occasion Have consumers use the product in new ways
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 10-44

A Product in Decline

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-45

Market Evolution Stages

Emergence

Growth

Maturity

Decline

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-46

Emerging Markets
Latent
Single-niche Multiple-niche
Zibbie Zone is one of several virtual worlds tied to toys.

Mass-market

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-47

Figure 10.5 Maturity Strategies

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-48

Marketing Debate
Do brands have finite lives? Take a position: 1. Brands cannot be expected to last forever. or

2. There is no reason for a brand to ever become obsolete.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 10-49

Marketing Discussion

What strategies do firms use to try to position themselves on the basis of pairs of attributes and benefits?

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

10-50

 A brand is more than a product, as it can have dimensions that differentiate it in some way from other products designed to satisfy the same need.

1.51

 Some brands create competitive advantages with product performance; other brands create competitive advantages through non-productrelated means.

1.52

Why do brands matter?

What functions do brands perform that make them so valuable to marketers?

1.53

Importance of Brands to Consumers

Identification of the source of the product Assignment of responsibility to product maker Risk reducer Search cost reducer Promise, bond, or pact with product maker Symbolic device Signal of quality
1.54

Reducing the Risks in Product Decisions

Consumers may perceive many different types of risks in buying and consuming a product: Functional riskThe product does not perform up to expectations. Physical riskThe product poses a threat to the physical well-being or health of the user or others. Financial riskThe product is not worth the price paid. Social riskThe product results in embarrassment from others. Psychological riskThe product affects the mental well-being of the user. Time riskThe failure of the product results in an 1.55 opportunity cost of finding another satisfactory

Importance of Brands to Firms

To firms, brands represent enormously valuable pieces of legal property, capable of influencing consumer behavior, being bought and sold, and providing the security of sustained future revenues.

1.56

Importance of Brands to Firms

Identification to simplify handling or tracing Legally protecting unique features Signal of quality level Endowing products with unique associations Source of competitive advantage Source of financial returns
1.57

Can everything be branded?

Ultimately a brand is something that resides in the minds of consumers. The key to branding is that consumers perceive differences among brands in a product category. Even commodities can be branded:
Coffee (Maxwell House), bath soap (Ivory), flour (Gold Medal), beer (Budweiser), salt (Morton), oatmeal (Quaker), pickles (Vlasic), bananas (Chiquita), chickens (Perdue), pineapples 1.58 (Dole), and even water (Perrier)

An Example of Branding a Commodity

De Beers Group added the phrase A Diamond Is Forever

1.59

What is branded?
Physical goods Services Retailers and distributors Online products and services People and organizations Sports, arts, and entertainment Geographic locations Ideas and causes
1.60

Source of Brands Strength

The real causes of enduring market leadership are vision and will. Enduring market leaders have a revolutionary and inspiring vision of the mass market, and they exhibit an indomitable will to realize that vision. They persist under adversity, innovate relentlessly, commit financial resources, and leverage assets to realize their vision.
Gerald J. Tellis and Peter N. Golder, First 1.61 to Market, First to Fail? Real Causes of Enduring

Importance of Brand Management

The bottom line is that any brandno matter how strong at one point in timeis vulnerable, and susceptible to poor brand management.

1.62

Branding Challenges and Opportunities

Savvy customers Brand proliferation Media fragmentation Increased competition Increased costs Greater accountability

1.63