GR 1

• WHY IMPROVE PRODUCTS?

  • For corporate pride

  • To be consistent with innovative image

  • To better attract/satisfy customers

  • To stave off competition

  • Because the macroenvironment changes

  • Consumer tastes, natural resources, demographics, cultural changes, etc
• Approaches to Developing New Products

  Top-down (inside-out)

  • Idea generation
  • Design and development
  • Commercialization
  • Customer feedback is sought later in the process; marketing supports product launch
  • Works well in industries where internal R&D has expertise that end-customers lack
  • Co-creation (bottom-up or outside-in)
  • Customer & company co-create product
• NEW PRODUCT DEVELOPMENT

  Idea Generation

  Market Potential

  Concept Testing

  Design and Development

  Beta Testing

  Launch
• NEW PRODUCT DEVELOPMENT

  The NPD process is not entirely linear- It is important to continually revisit prior decisions and change when necessary e.g., A good decision in stage 2 may not be a good decision in later stage
• NEW PRODUCT DEVELOPMENT

  Marketing is involved throughout process- Idea generation, refinement, marketing mix decisions, etc.
• Where do new ideas come from?

  Internal The Boss R&D, In-house experts, Brainstorming Employees (e.g., suggestion box) Feedback from front line, sales force
• Where do new ideas come from?

  External Customers (complaints, lead users, marketing research-focus groups, scan blogs) Business partners (requirements to decrease costs, requests to enhance quality), Competition Context (remember PEST); i.e., Trend-spottingt (remember PEST); i.e., Trend-spotting
• IDEA CREATION & MARKET POTENTIAL

  Idea Generation Brainstorming: "No idea's a bad idea; let's get everything up on the white board" Firms may allocate time for employees to work on pet projects
• IDEA CREATION & MARKET POTENTIAL

  
  

  In-house winnowing & refinement Screen ideas for plausibility using: Internal experts' knowledge, Marketers' target knowledge, Management's company knowledge Feasibility assessments and business analyses are used to clarify assumptions, address key questions about target segment, competitors, cannibalization risks, distribution channels, organizational goals, and marketing objectives
• Obtain feedback on plausible ideas

  1. Use marketing research to
  2. Save a company from a bad idea

  • Yield information to tweak an idea
  • Encourage pursuit of good idea
  • 2. Research may include focus groups, online surveys, etc.
  • 3. Conjoint analysis may also be used to determine trade-off
• FOCUS GROUP

  2-3 groups (per segment) of 8-10 customers Usually last 1.5-2 hours Goal is background information to improve product development or product positioning Participants give feedback on product concept
• CONJOINT PROCEDURE

  Different combinations of attributes are put together and compared Customer says which is best, next best, etc. Use in focus groups, online studies, etc. Allows marketers to see what attributes are most attractive e.g., Should a laptop have a thick display, specific color, or a longer battery life?
• Concept Testing Testing Design & Design & Development

  “Research results are used to develop a prototype”
• BETA TESTING

  A beta version is made available for trial

  -Ideal to simulate a real-world purchase

  -Used to help forecast sales

  Customer reactions to marketing materials are also examined

  -Ad copy, price points, distribution, etc.

  -Clarifies image of product to customer

  -Allows company to get feedback
• BETA TESTING

  Beta testing is the phase of software development where a pre-release version of the software, known as the beta version, is made available to a select group of external users or testers for evaluation and feedback. Beta testing typically occurs after alpha testing, where the software has undergone initial testing by the development team in a controlled environment.
• Beta Testing-Try product in market on a small scale before an expensive full scale rollout
• AREA TEST MARKETS:

  • Product is made available and ads are run in a few randomly selected metropolitan areas

  • Sales are observed and compared to sales in control markets

  • Not as commonly used now because

  • They are expensive, require setup, tip off competition, and sampled areas may have own "flavors"
• ELECTRONIC TEST MARKETS-are more valid than area test markets

  • Households within a sample of metropolitan areas are selected: some are designated "test" and some are "control"
  • Electronic (cable) transmissions are sent to test households, but not sent to the control households
  • Differences between the test and control households' purchasing are evaluated
• SIMULATED TEST MARKETS

  • Popular premarket launch tests
  • Customers are recruited and given play money to shop in a simulated environment
  • They can buy the new product and competitors products
  • Advertising materials are available with competitors' advertising
  • Marketers record purchases
  • Customers complete a survey Data are used as input to forecast sales
• Launch

  • Forecast sales
  • If not promising, abort launch
  • If promising, launch
  • Forecasts are important to
  • Accounting and finance for budgeting Sales force for setting sales goals
  • Production and logistics for planning equipment, storage, transportation, etc
  • Forecasting
  • Goal is to estimate sales potential ($SP), not sales
• Forecasting

  1. Determine market potential (MP) • How many units might be sold- Start with secondary data Census, sales for similar products, etc. Relevant in-house benchmarking data
  2. Estimate the purchase intention (PI) • Likelihood target will buy the product • Use recent marketing research- e.g., Assume research suggests PI = 0.7 • Note: Customers usually overstate PI; estimate 3¼ downward P = 34(0.7)= 0.525
  3. Determine the price (Pr) • Remember economics; PI may increase as Pr decreases Forecasting equation: $SP = MP × PI × Pr • Remember this number is not profit; it is maximum sales
• TIMING

  • The process of developing new products can be relatively quick or slow

  • Delays caused by

  • Internal activities such as testing
  • External factors such as regulations e.g., New pharmaceuticals take years
  • Promotional efforts are intended to create enough sales to recoup development costs
• Product Life Cycle

  Describes the evolution and duration of a product in the marketplace. The life cycle of a product is broken into four stages— introduction, growth, maturity, and decline
• Market introduction

  • Low sales
  • Heavy marketing spending on awareness
  • Most of the products fails at this stage
  • Limited distribution
• Market growth

  • Sales and profits increase
  • Distribution coverage is greater
  • Price may increase
  • Competition - Competitors enter the market and kill each other off or specialize - Product needs competitive awareness
  • Promotion focuses on product's superiority
• Market maturity

  • Sales and Growth tend to slow down
  • Promotion focuses on the superiority of the product and provides a reminder to buy
  • The Product is well established and the cost of producing and marketing will decline
  • Branding, price, and product differentiation become even more important
• Market decline

  • Sales and profit decline
  • New products replace older generations
  • Old products may be - Divested: sold-sell early to get best price - Harvested: support reduced - Rejuvenated: refurbished with new benefits
• Diffusion Of Innovation

  A normal curve is utilized to partition customers into groups to show how new products spread through the marketplace
• Diffusion Of Innovation

  Innovators: first 3-5% - Like to try new products; willing to take risks Early adopters: next 10-15% - Even more influential as opinion leaders because the group is bigger

  Early majority: next 34% - More risk averse - Waiting to hear about favorable experiences from early adopters

  Late majority: next 34% Even more cautious Often older and more conservative Want to buy only proven products

  Laggards or non-adopters: next 5-15% Most risk averse Skeptical of new products Stereotypically lower in income Product category may not be relevant to them
• Cumulative Diffusion

  • Diffusion curve is recast to show cumulative sales
  • Tipping point: point at which sales rate increases rapidly
• New Product Acceptance

  Consumer Acceptance tends to be higher when the new product:

  • If it has a clear relative advantage from already there product
  • Is compatible with customers' lifestyles
  • Is not overly complex or has a user-friendly interface
  • Is easily tried or sampled
• New Product Willingness

  • Companies vary in their willingness to pursue new products
  • From innovator to reactor
  • Market pioneers have difficulty with "really new" products
  • First movers launch "incrementally new products because there is less risk"
  • Early followers have approximately the same survival risks 3
• What is the Ansoff Matrix?

  The Ansoff Matrix, often called the Product/Market Expansion Grid, is a two-by two framework used by management teams and the analyst community to help plan and evaluate growth initiatives. In particular, the tool helps stakeholders conceptualize the level of risk associated with different growth strategies.
• Market penetration

  • Sell the same products to current customers

  • New ways to use, better marketing mix, etc. Easiest strategy
• Market penetration

  • The company sells performance apparel, and in recent years it has surpassed Adidas to become the number-two athletic-wear provider in the U.S. The company has persistently focused on selling athletic footwear, clothing, and accessories, and was able to capture a leadership position in the market with that strategy
• Product development

  • Sell new or modified products to current customers

  • Introduce extensions or new variations

  • Company wants to be innovative
• Product development

  • Netflix is the world's leading streaming entertainment service with over 209 million subscribers in over 190 countries (July 2021). Netflix started in 1997 as a DVD mail rental business. In 2007, the company shifted its business model and decided to go digital with the introduction of streaming media. Customers can now access a wide range of movies, TV series, and original Netflix content for an affordable, no-commitment monthly fee.
• Market development

  • Sell existing products to new segments
  • Move global or target different segment
  • May need to change image, channels, etc.
• Market development

  • The infamous ride service app, Uber, has seen significant growth in the last decade through a unique combination of diversification strategy (i.e. food delivery, bikes, scooters, etc.), market development strategy (i.e. ride sharing, luxury upgrades, etc.), and product development strategy. Developed in 2009, and initially introduced to a small San Francisco market in 2010, Uber’s aggressive market development strategy has landed them in over 700 cities worldwide as of 2020.
• Diversification

  • Pursue new markets with new products

  • Too difficult for most companies due to lack of experience in product and market

  • Toughest strategy