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 Development
Reasons 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 DevelopmentProduct 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 DevelopmentIssues to be addressed in 3 stages

1.

2.

3.

TG MKT Size, Structure, behavior AND Planned

Pdt Positioning, sales, Market Share and profit
goals for first few years
Panned Price, Dtbn Strategy and Mktg budget for
first year
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 markets
2.
Controlled test markets
3.
Simulated test markets
4.
Perceptual test markets

Which of the following is not a form of test

marketing?
1.
Standard test markets
2.
Controlled test markets
3.
Simulated test markets
4.
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
companys new ideas.
1.
standard
2.
controlled
3.
simulated
4.
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
companys new ideas.
1.
standard
2.
controlled
3.
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 individuals 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 Cycle

Four 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 didnt 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 identify
which stage of the
PLC the product is in

Hard to pinpoint
when the product
moves to next stage

Hard to identify
factors that affect
products movement
through stages
Hard to forecast
sales level, length of
each stage, and
shape of PLC

Strategy is both a
cause and result of
the PLC

Introduction Stage of the PLC

Summary of Characteristics, Objectives, &
Strategies Low
Sales
Sales
Low
Costs
Costs

High
High cost
cost per
per customer
customer

Profits
Profits

Negative
Negative

Marketing
Marketing Objectives
Objectives

Create
Create product
product awareness
awareness and
and trial
trial

Product
Product

Offer
Offer aa basic
basic product
product

Price
Price

Use
Use cost-plus
cost-plus formula
formula

Distribution
Distribution

Build
Build selective
selective distribution
distribution

Promotion
Promotion

Heavy
Heavy to
to entice
entice product
product trial
trial

Growth Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales
Sales

Rapidly
Rapidly rising
rising

Costs
Costs

Average
Average cost
cost per
per customer
customer

Profits
Profits

Rising
Rising

Marketing
Marketing Objectives
Objectives

Maximize
Maximize market
market share
share

Product
Product

Offer
Offer extension,
extension, service,
service, warranty
warranty

Price
Price

Penetration
Penetration strategy
strategy

Distribution
Distribution

Build
Build intensive
intensive distribution
distribution

Promotion
Promotion

Reduce
Reduce to
to take
take advantage
advantage of
of demand
demand

Maturity Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales
Sales

Peak
Peak

Costs
Costs

Low
Low cost
cost per
per customer
customer

Profits
Profits
Marketing
Marketing Objectives
Objectives

High
High
Maximize
Maximize profits
profits while
while defending
defending market
market
share
share

Product
Product

Diversify
Diversify brand
brand and
and models
models

Price
Price

Match
Match or
or beat
beat competitors
competitors

Distribution
Distribution

Build
Build more
more intensive
intensive distribution
distribution

Promotion
Promotion

Increase
Increase to
to encourage
encourage brand
brand switching
switching

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

Decline Stage of the PLC

Summary of Characteristics, Objectives, & Strategies
Sales
Sales

Declining
Declining

Costs
Costs

Low
Low cost
cost per
per customer
customer

Profits
Profits

Declining
Declining

Marketing
Marketing Objectives
Objectives

Reduce
Reduce expenditures
expenditures and
and milk
milk the
the brand
brand

Product
Product

Phase
Phase out
out weak
weak items
items

Price
Price

Cut
Cut price
price

Distribution
Distribution

Selective:
Selective: phase
phase out
out unprofitable
unprofitable outlets
outlets

Promotion
Promotion

Reduce
Reduce to
to minimum
minimum level
level

________ is a review of the sales, costs, and profit

projections for a new product to find out
whether these factors satisfy the companys
objectives.
1.
Market strategy development
2.
Product development
3.
Business analysis
4.
Forecasting

________ is a review of the sales, costs, and profit

projections for a new product to find out
whether these factors satisfy the companys
objectives.
1.
Market strategy development
2.
Product development
3.
Business analysis
4.
Forecasting

The systematic search for new-product ideas is

called ________.
1.
idea generation
2.
idea search
3.
idea screening
4.
concept development

The systematic search for new-product ideas is

called ________.
1.
idea generation
2.
idea search
3.
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 strategy
2.
concept development and testing
3.
product development
4.
none of the above

Once the new product ideas have been screened,

the next step in the new product development
process is ________.
1.
marketing strategy
2.
concept development and testing
3.
product development
4.
none of the above

Which of the following is not a stage in the product

life cycle (PLC)?
1.
Idea screening
2.
Growth
3.
Maturity
4.
Decline

Which of the following is not a stage in the product

life cycle (PLC)?
1.
Idea screening
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.
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.
Introduction
2.
Growth
3.
Maturity
4.
Decline

________ tend to grow slowly, remain popular for a

while, and then decline slowly.
1.
Fads
2.
Styles
3.
Fashions
4.
Designs

________ tend to grow slowly, remain popular for a

while, and then decline slowly.
1.
Fads
2.
Styles
3.
Fashions
4.
Designs

Marketers should consider public policy issues

involving product safety, environment, and
warranties. This is referred to as ________.
1.
social responsibility
2.
positioning
3.
marketing mix
4.
commercialization

Marketers should consider public policy issues

involving product safety, environment, and
warranties. This is referred to as ________.
1.
social responsibility
2.
positioning
3.
marketing mix
4.
commercialization