2. From concept to shop:
Marketing and new product development
Discussion points
Define product
New product development (NPD)
Product Life Cycle (PLC)
Brand & Branding
2
5. What is a product?
• A product is any offering by a company to a
market that serves to satisfy customer needs and
wants.
• It can be an object, service, idea, etc.
• Please refer your Chapter -1 Handout
5
6. Product Mix
• The assortment of products that a company offers
to a market
• Width – how many different product lines?
• Length – the number of items in the product mix
• Depth – The no. of variants offered in a product
line
• Consistency – how closely the product lines are
related in usage
6
7. Product Characteristics
The inherent features of the product offering,
whether actual or perceived.
Product constituents and content
Branding
Packaging
Appearance
Method of operation or usage
Quality
Service
Country-of-origin effects 7
10. Industrial goods classification
1. Materials and Parts
- Raw materials
- Manufactured materials and parts
2. Capital items
3. Supplies and business services
10
12. Tech- vs. User-Driven Products
12
Technology-Driven
Products
Hard Disk Drive
User-Driven
Products
Super Computer Laptop Computer
Automobile
Mobile Phone
Desktop Computer
Office Chair
Coffee Maker
Camera
Wrist Watch
13. Product types from the ID point of view
• Technology-driven products
• Engineering or technical requirement is paramount
• ID has little involvement
• Extreme cases of Intel chips and GE engines
• User-driven products
• Usually there is a high degree of user interaction for
these products.
• The functionality and/or its aesthetic appeal are
important
• ID works closely with marketing and engineering
throughout the process. 13
15. In planning its market offering, the marketer
needs to address five product levels
Each level adds more customer value, and the
five constitute a customer-value hierarchy.
The fundamental level is the core benefit: the
service or benefit the customer is really buying.
A hotel guest is buying rest and sleep.
The purchaser of a drill is buying holes.
Marketers must see themselves as benefit
providers.
Product Levels: The Customer-Value
Hierarchy
15
16. Product Levels: The Customer-Value
Hierarchy
At the second level, the marketer
must turn the core benefit into a
basic product.
Thus, a hotel room includes a
bed,bathroom,towels,desk, dresser,
and closet
16
17. Product Levels: The Customer-Value Hierarchy
At the third level, the marketer prepares an
expected product, a set of attributes and
conditions buyers normally expect when
they purchase this product.
Hotel guests minimally expect a clean
bed, fresh towels, working lamps, and a
relative degree of quiet
17
18. Product Levels: The Customer-Value Hierarchy
At the fourth level, the marketer
prepares an augmented product that
exceeds customer expectations.
In developed countries, brand
positioning and competition take place at
this level.
In developing and emerging markets
such as India and Brazil, however,
competition takes place mostly at the
expected product level.
18
19. At the fifth level stands the potential product,
which encompasses all the possible
augmentations and transformations the
product or offering might undergo in the
future.
Here is where companies search for
new ways to satisfy customers and
distinguish their offering.
Product Levels: The Customer-Value Hierarchy
19
20. Product Levels: The Customer-Value Hierarchy
Differentiation arises and competition increasingly
occurs on the basis of product augmentation,
which also leads the marketer to look at the
user’s total consumption system:
the way the user performs the tasks of
getting and using products and related
services.
Each augmentation adds cost, however, and
augmented benefits soon become expected
benefits and necessary points-of parity in the
category.
20
22. New Product Development
• Most new product development is an
improvement on existing products
• Less than 10% of new products are totally
new concepts.
22
23. Success rate of new products
• The success rate of new products is very low – less
than 5%.
• ‘You have to kiss a lot of frogs to find a prince.”
• Product obsolescence is rapid with improvements in
technology
• Shorter PLCs
23
24. Although the definitions of failure are somewhat elusive,
research suggests that 30 to 40 percent of industrial
products fail.
The Major
Drivers of a
Firm’s New
Product
Performance
Developed by Cool Pictures and MultiMedia Presentations
24
25. Product Development
Product development is essential for
catering to new or changing customer
needs on a global basis.
The goal of the product
development process is to build
adaptability into products and product
lines to achieve worldwide appeal.
25
26. Product Development Stages
I. Idea generation
II. Idea screening & Evaluation
III. Business analysis
IV. Product and process development
V. Product testing/scale-up
VI. Commercialization
26
27. Reasons for new product development
Food is an essential aspect for maintaining life. Red meat in particular
provides many nutrients essential for life.
The purpose for developing new red meat products could be due to:
• A gap in the market, e.g. organic farmed food products
• New consumer pressures, e.g. economic crisis
• Drop in customer loyalty or loss of market share
• New ideas or technology
• An emerging consumer demand, e.g. convenience, health or
indulgence.
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Product Development
Sources for idea generation:
Company
Customers
Lead users
Procurement requisitions from
governments and supranational
organizations
Facilitating agents, such as
advertising agencies or market
research organizations
29. Develop concept ideas
Concept ideas can arise from a variety of different sources.
New product concepts can be developed and informed through:
• market research
• consumer trends
• customer feedback
• new industry regulations
• new technologies available
• target customer profiles
• replacement of products at the end of their life cycle
• creating a product which will compete with a current product already
on the market.
Background research is conducted to identify opportunities for a new
product. This can include researching current products produced by
competitors or consumer attitudes and behaviour with market research.
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30. 30
Develop concept ideas
Accept
Test on a small scale with samples
Organoleptic analysis (sensory testing) Reject
Consumer testing
Finalise product specification
Produce product on a large scale
Promote product
Launch new product
Organoleptic analysis (sensory testing)
Accept
Reject
Modify product
Pilot plant
Reject
Accept
2. New product development
New product development
(NPD) is an important
process for food companies
to undertake in order to
meet consumer needs and
remain competitive in the
food market.
Many product ideas fail at
different stages of the
process.
Many food companies will
continuously have a variety
of products at different
stages of development.
31. 2. Idea Screening & Evaluation
• A screening process focuses on company’s energies in
creating and developing products that have greater
likelihood of succeeding in the market place.
• The recognition that significant new financial,
managerial, marketing, production, or supplier resources
would be required, would reduce the attractiveness and
feasibility of producing the new product.
31
32. 3. Business analysis
The business analysis phase, along with the remaining phases in
the process expands the idea or the concept through creative
analysis into a “go” or “no go” recommendation.
• Management examines return-on-investment criteria as well as
competition and the potential for profitable market entry.
• Demand & cost projection, Competition, Required investment,
Profitability Break even analysis, Discounted cash flow,
• Simulation models to assess the likely profitability of promising
new product ideas.
32
33. 4. Product development
• The product development phase takes the product to a
state of readiness for product and market testing.
• Activities during this particular stage are more difficult
and time consuming than many would expect.
Something that looks great on a paper can fail
miserably when engineers and production technicians
try to create the physical product.
• Many new product ideas are either abandons or sent
back for more study at this point in the development
process.
33
34. 5. Product Testing
• The firm conducts commercial experiments necessary to verify
earlier business judgments during the product testing phase.
• Testing takes place both in the laboratory and in the field and
usually involves pilot production testing as well as market
testing for acceptance or rejection.
• Test markets
• Test periods
• What information to gather?
• What action to take?
34
35. Product Testing (Cont’d)
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Testing of new product concepts for
performance and customer acceptance:
Is the final stage of product development.
Ranges from reliability tests to mini-
launches.
Is undertaken to avoid high rate of product
failure.
Reasons for product failure:
Relying on instinct or hunch rather than
testing and research.
Lack of product distinctiveness.
Unexpected technical problems.
Mismatch between functions.
36. Some products do not pass the NPD process
Many products may fail at different stages of the NPD process and may
never be launched. Products which are launched may only be on sale
for a short period of time, before a new product replaces it.
Reasons for failure may include:
• tough competition
• cost of ingredients, production and packaging
• low profits
• ineffective advertising
• food scares
• poor product positioning on shelf.
Although many products may fail, the NPD process remains a crucial
part of any successful food company to ensure it remains competitive
against other companies.
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37. 6. Commercialization
• The final phase of development involves launching the new
product through full-scale production and sales and
committing the company’s reputation and resources to the
product’s success.
• When? (Timing)
• Where? (Which geographical markets)
• To whom? (Target markets)
• How? (Introductory Marketing strategy)
37
38. Commercialization (Cont’d)
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The time lag between product development
and introduction into the market depends on:
The product involved
Degree of newness
Customer characteristics
Geographic proximity
Firm-related variables
Degree of commitment of resources
39. Commercialization (Cont’d)
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The time lag between product development
and introduction into the market depends on:
The product involved
Degree of newness
Customer characteristics
Geographic proximity
Firm-related variables
Degree of commitment of
resources
42. Introduction
• Full-scale launch of new product into marketplace
• Sales are low
• Little competition
• Limited distribution
• High marketing and product costs
• Promotion focused on product awareness and to
stimulate primary demand – “pull strategy”
• Intensive personal selling to retailers and
wholesalers – “push strategy”
43. Growth
• Sales grow at an increasing rate
• Many competitors enter market
• Large companies may acquire small pioneering
firms
• Promotion emphasizes brand advertising and
comparative ads – “pull strategy”
• Wider distribution – “push strategy”
• Toward end of growth stage, prices fall
• Sales volume creates economies of scale
44. Maturity
• Sales continue to increase but at a decreasing rate
• Marketplace is approaching saturation
• Typified by annual models of products with an
emphasis on style rather than function
• Product lines are widened or extended
• Marginal competitors drop out
• Heavy promotions - sales promotions “push”
• Prices and profits fall
• Production moves to lower cost locations
45. Decline
• Signaled by a long-run drop in sales
• Rate of decline is governed by how rapidly
consumer tastes change or how rapidly substitute
products are adopted.
• Falling demand forces many out of market
• Few specialty firms left
46. 3. Product life cycle
46
Time (months/years)
Volume
of
sales
(how
many
are
sold)
New product is launched
Product matures – sales are steady
Plateau
Sales grow
Sales decline
Development
Saturation
0
The lifecycle of a product includes its time in
development and the time it is available for sale in the
market.
47. Product life cycle – sales boosting strategies
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Time (months/years)
Volume
of
sales
(how
many
are
sold)
New product is launched
Sales boosting or extension strategies are implemented
Sales grow
Development
0
48. Sales boosting strategies
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To boost sales and prevent a decline in a product life cycle, food
companies implement marketing strategies such as:
• advertising, e.g. television, billboard, online
• price reduction, e.g. vouchers or buy-one-get-one-free
• adding value – new features, e.g. limited edition varieties, new
pack sizes
• exploring new markets, e.g. international markets
• new packaging – subtle changes or completely new design
• consumer competitions.
These strategies can help the sales of particular products remain
relatively level for long periods of time.
49. Exhibit 14.3 - Example of Market-Product-Business Portfolio
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Market
Attractiveness
——— Market and Distribution Interconnectedness
………. Technology and Production Interconnectedness
High
Low
High
Competitive Strength
Low
Canned Tea-US
Canned Tea-Europe
Canned Tea-Asia
Ice Cream-US
Ice Cream-Europe
Ice Cream-Asia
Frozen Vegetables-
Europe
Frozen Vegetables-US
Frozen Main Dishes-
Europe
SOURCE: Adapted from Susan P. Douglas and Samuel Craig, “Global Portfolio Planning
and Market Interconnectedness,” Journal of International Marketing 4 (no.I, 1996):93-110.
54. Brand – (Aaker, Keller and Kotler)
A brand is a name, term, sign, symbol, or design
which is intended to identify the goods or services of
one seller or group of sellers and to differentiate them
from those of competitors.
• A name becomes a brand when consumers associate it with a set of
tangible and intangible benefits that they obtain from the product or
service
• It is the seller’s promise to deliver the same bundle of
benefits/services consistently to buyers.
Brands Should be:
• be memorable
• have a positive connotation
• convey a certain image 54
55. Good Brand Names
• Easy to say
• Easy to spell
• Easy to read
• Easy to remember
KISS
• Fit the target market
• Fit the product’s
benefits
• Fit the customer’s
culture
• Fit legal requirements
56. Advantages of branding
• Easy for the seller to track down problems and
process orders
• Provide legal protection of unique product features
• Branding gives an opportunity to attract loyal and
profitable set of customers
• It helps to give a product category at different
segments, having separate bundle of benefits
• It helps build corporate image
• It minimizes harm to company reputation if the
brand fails
56
57. Trademarks
• Legal term for a brand name, brand mark or trade
character
• ® is used when registered with the USPTO; ™ is
used when a name or mark has not been legally
registered but the user is claiming ownership
• Trademarks established by the Lanham Act of
1946 and updated by the Trademark Revision Act
of 1989
• Only protects in U.S. - if a firm wants
multinational recognition, it must register in each
country
58. Brand Equity
• Brand’s value to its organization
• Brand equity provides customer loyalty, perceived quality,
brand name awareness, competitive advantage
• Brand equity can be used to establish brand extensions
• Alka Seltzer, Alka Seltzer Morning Relief
59. Branding Strategies
• Individual brands versus family brands
• National and store brands (private label)
• Generic brands
• Licensing
• Co-branding
Brand repositioning
• This may be required after a few years to face new
competition and changing customer preferences
60. Packaging
• Includes the activities of designing and
producing the container for a product
• Packaging is done at three levels
- primary
- secondary
- shipping
60
61. Product characteristics
iv)Packaging
Serves three major functions—
Protection,
Promotion, and
User convenience.
Varies as a function of transportation mode,
transit conditions, and length of time in transit.
The promotional aspect of packaging relates
mostly to labeling.
61
62. Packaging as a marketing tool
Various factors contribute the growing use of
packaging as a marketing tool (Kotler, p.346)
• Self service
• Consumer affluence
• Company and brand image
• Innovation
62
64. Labels
• Identification
• Grade classification
• Description of product
• Manufacturer identity
• Date of mfg., batch no.
• Instructions for use
• Promotion
64
65. Labels as a marketing tool
• Labels need to change with time or
packaging changes to give it a
contemporary and fresh look.
• Packaging functions
• Effective packaging designs
• Labeling regulations
65
