New Product A product new to the world, the market, the producer, the seller, or some combination of these.
New pdt development New to world New product line Addition to existing pdt line Repositioning, cost reductions Acquired Companies Acquired Patents Acquired Licenses Strategies for Obtaining New Product Ideas
Categories of New Products New-To-The-World New Product Lines Product Line Additions Improvements/Revisions Repositioned Products Lower-Priced Products Six Categories of New Products
Why Do We Develop New Products?
Increase sales and profits
Product life cycle and having products in every stage/shorter cycles
Increased domestic & foreign competition
Change in consumers needs & tastes /product obsolescence
Causes of New Product Failures
Overestimation of market size,
Product design problems,
Product incorrectly positioned, priced or advertised,
Product may have been pushed despite poor marketing research findings,
Costs of product development
Why Do New Products Fail?
Shortage of imp. ideas
Social n govt. constraints
Costliness of development process
Faster development time
Shorter product life cycles
Improving New-Product Success
New product success depends on having :
Unique superior product (one with higher quality, features, and value in use)
Well-defined product concept (a defined target market, product requirements, and benefits).
understand its customers, markets and competitors, &
develop products that deliver superior value to customers.
Lessons From Npd In India
Understanding local culture-mcdonalds
Value for money as positioning-Peter England
Pdt. availability in urban n rural
International brand helps firm gain entry.
New-Product Development Process Idea Generation Idea Screening Concept Develop.& Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization
Idea Generation Customers Employees Distributors Competitors R & D Consultants Creative Thinking Sources of New-Product Ideas
Process to spot good ideas and drop poor ones as soon as possible.
Many companies have systems for rating and screening ideas which estimate:
Development Time & Costs
Rate of Return
Criteria In Reviewing Idea
Does product meet need?
Would it offer superior value?
Can it be distinctively advertised?
Does co. have capital & R&D?
Will new product deliver sales vol., sales ,growth, profit?
Concept Development 1. Develop New Product Ideas into Alternative Detailed Product Concepts 2. Concept Testing - Test the New Product Concepts with Groups of Target Customers 3. Choose the One That Has the Strongest Appeal to Target Customers Product Image is the Way Consumers Perceive an Actual or Potential Product
Product idea-possible pdt co. might offer
Product concept-elaborated version of idea in consumer terms
Marketing Strategy Part Three Describes Long-Term: Sales & Profit Goals-25% mkt share,12% investment Marketing Mix Strategy Part Two Describes First-Year: Product’s Planned Price Distribution-allowances,free samples Marketing Budget-adv on tv n print Part One Describes Overall: Target Market-Young Planned Product Positioning-low price,good quality Sales & Profit Goals Market Share-10% to 14%
Business Analysis Considerations in Business Analysis Stage Preliminary Demand Cost Sales Profitability
quality function deployment-CA-EA
Improves communication b/w marketers, engineers, manufacturing
Functional aspects n psychological parameters like size, color, weight
Alpha test- test pdt within firm
Beta test- customer will use prototype
Consumer test-invite consumer to co. n give them samples
Test Marketing Standard Test Market Full marketing campaign in a small number of representative cities. Controlled Test Market A few stores that have agreed to carry new products for a fee. Simulated Test Market Test in a simulated shopping environment to a sample of consumers. Sales wave research Reoffering pdt or competitor brand at less cost
Choosing a Test Market Advertising Packaging Product Budget Levels Positioning Distribution Pricing Branding Elements that May be Test Marketed by a Company Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings.
Alternatives to Test Marketing
Single-source research using supermarket scanner data
Simulated (laboratory) market testing
Commercialization Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising Steps in Marketing a New Product
Why New Products Fail
No discernible benefits
Poor match between features and customer desires
Overestimation of market size
Price too high or too low
Success Factors Match between product and market needs Unique but superior product Benefit to large number of people Factors in Successful New Products
Develop product for potential worldwide distribution
Build in unique market requirements
Design products to meet regulations and key market requirements
Diffusion The process by which the adoption of an innovation spreads.
Categories of Adopters Laggards Late Majority Early Majority Early Adopters Innovators Categories of Adopters in the Diffusion Process
Categories of Adopters Percentage of Adopters Time Innovators 2.5% Early Adopters 13.5% Late Majority 34% Early Majority 34% Laggards 16%
Product Characteristics and the Rate of Adoption Trialability Observability Relative Advantage Compatibility Complexity Product Characteristics Predict Rate of Adoption
Marketing Implications of the Adoption Process Direct from Marketer Word of Mouth Communication Aids the Diffusion Process
Product Life Cycle A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death). PLC
Product Life Cycle Time Dollars Product Category Profits Product Category Sales Introductory Stage Growth Stage Maturity Stage Decline Stage 0
High failure rates
Frequent product modification
High marketing and production costs
Promotion focuses on awareness and information
Intensive personal selling to channels
Full-Scale Launch of New Products
Increasing rate of sales
Entrance of competitors
Initial healthy profits
Promotion emphasizes brand ads
Goal is wider distribution
Prices normally fall
Development costs are recovered
Offered in more sizes, flavors, options
Declining sales growth
Extending product line
Stylistic product changes
Heavy promotions to dealers and consumers
Marginal competitors drop out
Prices and profits fall
Niche marketers emerge
Many consumer products are in Maturity
Long-run drop in sales
Large inventories of unsold items
Elimination of all nonessential marketing expenses
Rate of decline depends on change in tastes or adoption of substitute products
Marketing Strategies for PLC INTRODUCTION GROWTH MATURITY DECLINE Product Strategy Distribution Strategy Promotion Strategy Pricing Strategy Limited models Frequent changes More models Frequent changes. Large number of models. Eliminate unprofitable models Limited Wholesale/ retail distributors Expanded dealers. Long- term relations Extensive. Margins drop. Shelf space Phase out unprofitable outlets Awareness. Stimulate demand.Sampling Aggressive ads. Stimulate demand Advertise. Promote heavily Phase out promotion Higher/recoup development costs Fall as result of competition & efficient produc- tion. Prices fall (usually). Prices stabilize at low level.