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Managing The Marketing Mix

                Lecture 2:
  Product and New Product Development


               Dr. Martin J...
Review

Introduction         Marketing Mix:
                     The set of controllable tactical marketing tools: product...
What is A Product?
Introduction

What is a
                     Bundle of physical, service, and symbolic
product?        ...
Types of Products
Introduction
                     •   Actual product                •   Consumer Products
What is a     ...
New Products Commonly
                               Accepted Categories
Introduction

What is a            New Category  ...
Factors Influencing New Product
                          Development Success
Introduction

What is a product?            ...
Risk in New Product Development

Introduction
                     • NPD is a high risk activity
What is a product?       ...
The Eight Stags of New Products
                          Development Process
Introduction

What is a product?

New Produc...
The Eight Stags of New Products
                                    Development Process
Introduction         • (1) New Pro...
The Eight Stags of New Products
                                   Development Process
Introduction
                     •...
The Stage and Gate Model (Cooper 1993)

Introduction

What is a product?

New Product
                          Manage ris...
Commercialization

Introduction
                     • Product launch considerations and strategies:
What is a product?
  ...
Product Life Cycle (PLC)
Introduction
                     • A way to trace the stages of a product's acceptance from its
...
Product Life Cycle (PLC)


Sales/Profits
        Development Introduction       Growth     Maturity            Decline

  ...
Examples of PLC: High Learning Product
Introduction
                     • Significant education of the
What is a product?...
Examples of PLC: Low Learning Product
Introduction
                     • Sales begin immediately;
What is a product?
    ...
Examples of PLC: Fashion Product
Introduction
                     • Most often appear in
What is a product?     women’s a...
Examples of PLC: Fad Product
Introduction
                     • Rapid sales on introduction
What is a product?
          ...
Diffusion of An Innovation
Introduction

What is a product?

New Product
Development

Product Life Cycle
(PLC)

Diffusion ...
Crossing the Chasm
Introduction

What is a product?

New Product
Development

Product Life Cycle
(PLC)

Diffusion of
Innov...
Innovating for Mature Markets

     Process        Integration    Business Model
   Innovation       Innovation       Inno...
Introduction

What is a product?

New Product
Development

Product Life Cycle
(PLC)

Diffusion of
Innovation
Cycle

Summary
Summary

Introduction
                     • There are four main types of new products that can be
What is a product?     ...
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  1. 1. Managing The Marketing Mix Lecture 2: Product and New Product Development Dr. Martin J. Liu Lecturer in Marketing
  2. 2. Review Introduction Marketing Mix: The set of controllable tactical marketing tools: product, price, What is a product? place and promotion that the firm blends to produce the response it wants in the target market. New Product Development Marketing mix is a basic tool to identify Product positioning and Segmenting the Market. Product Life Cycle (PLC) Product Positioning: The way that product is defined by consumers on important Diffusion of Innovation Cycle attributes - the place the product occupies in consumer’s minds relative to competing products. i.e. Symbolic, Functional and Summary Experiential. Market Segmentation: The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.
  3. 3. What is A Product? Introduction What is a Bundle of physical, service, and symbolic product? attributes designed to enhance buyers’ want satisfaction. New Product Development Product Life Cycle (PLC) Diffusion of Innovation Cycle Summary
  4. 4. Types of Products Introduction • Actual product • Consumer Products What is a – Quality level – Convenience products product? – Features – Shopping products New Product – Design – Specialty Development – Package – unsought – Brand name Product Life Cycle (PLC) • Industrial Products • Augmented product – Material and parts Diffusion of – Installation – Capital items Innovation Cycle – After-sale service – Supplies and services Summary – Warranty – Delivery and credit – Attached benefit
  5. 5. New Products Commonly Accepted Categories Introduction What is a New Category Addition to product? Entries Existing Lines New Product Development Product Life Cycle New Products (PLC) Diffusion of Innovation Cycle Summary Repositioning New-to-the- world Products New Product Lines
  6. 6. Factors Influencing New Product Development Success Introduction What is a product? Technological factors New Product Development Product Life Cycle (PLC) Diffusion of Innovation Cycle Summary
  7. 7. Risk in New Product Development Introduction • NPD is a high risk activity What is a product? – Aprox. 90% of new products fail – Only aprox. 40% of new consumer products that are brought to New Product market will be around 5 years later Development – Industrial markets 35-65% failure rate Product Life Cycle – Pharmaceutical firms spend on average E400m per drug (PLC) Diffusion of • Innovation takes time Innovation Cycle – Biotechnology average 10 years of development Summary • Why do new products fail? – Failure to understand consumer needs – Undefined market – Undifferentiated products
  8. 8. The Eight Stags of New Products Development Process Introduction What is a product? New Product Development Product Life Cycle (PLC) Diffusion of Innovation Cycle Summary
  9. 9. The Eight Stags of New Products Development Process Introduction • (1) New Product Strategy What is a product? – Guideline for resource allocation – Sets up key criteria against which projects can be managed New Product • (2) Idea Generation Development – The search for innovative ideas and a process for the management of ideas Product Life Cycle (PLC) • (3) Screening – Initial assessment of demand for the ideas generated Diffusion of – Ideas acceptable for further development Innovation Cycle • (4) Concept Development and Testing Summary – Content & form of idea – Development of a variety of concepts – Tested for compatibility with production plant – Tested for compatibility with customer needs/tastes
  10. 10. The Eight Stags of New Products Development Process Introduction • (5) Business Analysis What is a product? – Market analysis, break even volume, technical costs, production implications. Fit with corporate objectives New Product • (6) Product Development & Testing Development – Determine the validity of the theoretical product, e.g., Product Life Cycle Innocent Smoothies made & tested fresh fruit smoothies at a (PLC) music festival. – Prototypes-alterations to specifications. Diffusion of Innovation Cycle • (7) Test Marketing – Small scale tests with customers. Summary – N.B. test marketing is not always feasible or desirable.
  11. 11. The Stage and Gate Model (Cooper 1993) Introduction What is a product? New Product Manage risk by screening at review points. Development Product Life Cycle (PLC) Diffusion of Innovation Cycle Summary
  12. 12. Commercialization Introduction • Product launch considerations and strategies: What is a product? –Degree of novelty of product/service New Product –Familiarity/ position in intended market Development –Competition; status/ anticipated reaction Product Life Cycle (PLC) • Timing –Diffusion theory and new product acceptance. Diffusion of Innovation Cycle –Identify the early adopters Summary • Communications –Internal and external • Monitoring the launch
  13. 13. Product Life Cycle (PLC) Introduction • A way to trace the stages of a product's acceptance from its What is a product? introduction to its demise. New Product • One of the most familiar concepts in marketing Development • A prevalent marketing management tool • Refers to the life of the product category. Product Life Cycle (PLC) • The time a product category spends in a stage of the product life cycle may vary from a few weeks to decades. Diffusion of • Does not predict how long a product category will remain in Innovation Cycle any one stage Summary • A tool to help marketers understand: – where their product is now – what may happen – which strategies are normally appropriate.
  14. 14. Product Life Cycle (PLC) Sales/Profits Development Introduction Growth Maturity Decline Rejuvenation Limited Life Cycle Product Life Cycle Profits Losses Time Break Even
  15. 15. Examples of PLC: High Learning Product Introduction • Significant education of the What is a product? customer is required; New Product • Extended introductory Development period. Product Life Cycle (PLC) Diffusion of Innovation Cycle Summary
  16. 16. Examples of PLC: Low Learning Product Introduction • Sales begin immediately; What is a product? • Little learning is required New Product by the consumer; Development • Benefits of purchase are readily understood . Product Life Cycle (PLC) Diffusion of Innovation Cycle Summary
  17. 17. Examples of PLC: Fashion Product Introduction • Most often appear in What is a product? women’s and men’s New Product clothing styles; Development • Length of the cycles may be years or decades. Product Life Cycle (PLC) Diffusion of Innovation Cycle Summary
  18. 18. Examples of PLC: Fad Product Introduction • Rapid sales on introduction What is a product? • Equally rapid decline; New Product • Often novelties and have a Development short life cycle. Product Life Cycle (PLC) Diffusion of Innovation Cycle Summary
  19. 19. Diffusion of An Innovation Introduction What is a product? New Product Development Product Life Cycle (PLC) Diffusion of Innovation Cycle Summary
  20. 20. Crossing the Chasm Introduction What is a product? New Product Development Product Life Cycle (PLC) Diffusion of Innovation Cycle Summary
  21. 21. Innovating for Mature Markets Process Integration Business Model Innovation Innovation Innovation Line Extension Marketing Experiential Innovation Innovation Innovation
  22. 22. Introduction What is a product? New Product Development Product Life Cycle (PLC) Diffusion of Innovation Cycle Summary
  23. 23. Summary Introduction • There are four main types of new products that can be What is a product? launched New Product • NPD is a high risk/ high reward activity Development • A formal review process with review points and a clear new product strategy underlying the process leads to greater Product Life Cycle success (PLC) • Product life cycle (PLC) and diffusion of innovation. Diffusion of • A strong market orientation and understanding of Innovation Cycle technological opportunities is key. Summary
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