Marketing’s role in new product development and product decisions.

• Marketing’s role in new product development and product decisions

LEARNING OBJECTIVES

• Categorize products by type.• Define new product success and newness

and learn how to set the stage for creating success.

• Describe strategies, processes, and organizational structures by which products are developed.

Categorize products by type

Define new product success and newness and learn how to set the stage for creating success

Describe strategies, processes, and organizational structures by which products are developed

LEARNING OBJECTIVES

• Discuss the importance of branding, packaging, and labeling decisions.

• Understand how to manage products through their life cycles.

• Identify issues associated with managing across multiple projects in the portfolio.

Discuss the importance of branding, packaging, and labeling decisions

Understand how to manage products through their life cycles

Identify issues associated with managing across multiple projects in the portfolio

TYPES OF PRODUCTS

• Consumer Products

• Business-to-Business Products

• Table 8.1

Consumer Products

SETTING THE STAGE FOR SUCCESSFUL NEW PRODUCT DEVELOPMENT

• New to the market

• New to the company

New Product Development (NPD) Success

• Financial success• Technical performance success• Success from the customer’s

perspectiveMarket shareCustomer satisfaction

Why Products Fail

• Strategic FactorsNo advantage or performance

improvementLack of synergy with

technologies and manufacturing processes

Lack of synergy with marketing• Developmental Process Factors

Requirements for Developing Successful New Products

• Uncover unmet needs and problems

• Develop a competitively advantaged product

• Shepherd products through the firm

Uncovering Unmet Needs and Problems

• Defining Customer Needs• Understanding Customer Needs• Becoming the Customer:

Discovering Problems• Anthropological Excursions: Live

with and Critically Observe Customers

• Talk to Customers to Get Needs and Problems (VOC)

Developing a Competitively Advantaged Product

• Competitively advantaged product is a product that solves a set of customer problems better than any competitor's product.

Shepherding products Through the Firm

• Leading NPD ProjectsProject leadersChampionsNPD process owners

• Mustering Management Support for NPD

New Product Development Process

• Successful product development:

Uncover unmet needs and problems Develop

competitively advantaged product Shepherd

products through a firm

• Define customer needs• Understand customer needs

Become customers - first hand experience Observe customers - anthropological

excursions Interview customers - voice of the customer

Uncover unmet needs and problems

Develop competitively advantaged product

Shepherd products through a firm

• Strategic focus Markets/Market segments Product types or categories Product lines Technologies/Technology platforms

• Project Strategy Describes target market and core benefit

package for the product

• Managing development Stage-Gate Process (next slides)

Review

1Stage 1 Stage 2

Stage 3 Stage 4 Stage 5

IdeationGate

recycle

Idea generation and screen

Review

1Stage 1 Stage 2

IdeationGate

recycle

Preliminary investigation

Review

1Stage 1 Stage 2

IdeationGate

recycle

Detailed investigation

Review

1Stage 1 Stage 2

IdeationGate

recycle

Development

Review

1Stage 1 Stage 2

IdeationGate

recycle

Testing and validation

Review

1Stage 1 Stage 2

IdeationGate

recycle

Product launch

• Insert Table 8.2

A Framework for Managing Product Development: Stage-Gate Processes

Generate and Screen Ideas

• NPD project leadershipProject leaders - most frequent, appointed

by upper management with formal powerChampions - unofficial, informally influenceProcess owners - build and maintain

expertise in NPD, may act in leadership roles as well

• NPD project organizationFunctional NPD structure -

responsibility resides with a managerDivisional NPD structure - each division

is responsible for their own marketsVenture group structure - risky

projects

• NPD project management support tips Interview specific managers for project

expectations, customer needs Send out weekly updates Invite relevant managers to participate Request management involvement with

prototypes

• NPD project management support tips Use managers as test subjects Create a weekly/monthly lunch for managers Invite managers to after-hours team functions

MAKING PRODUCT DECISIONS

• Branding

• Packaging

• Labeling

Branding

• Brands - used to simplify choices and reduce purchase risk for consumers

• Brand equity - marketplace value of a brand based on reputation and goodwill

• Insert Figure 8.7

Successful and Unsuccessful Brand Extensions

Brand Name, Logo, Trademark

• Brand name, logo, trademark shouldAttract attentionBe memorableHelp communicate the

positioning of the productDistinguish the product

Branding Strategies

• Branding strategiesIndividual brand

name strategy•Proctor and Gamble, General Mills, etc.

Branding Strategies

• Branding strategiesFamily brand

name strategy•Coca-Cola, Fischer Price, etc.

Branding Strategies

• Branding strategiesHybrids: blanket

family name, separate family names for types of products, family/individual brand combinations

Packaging Strategies

• Packaging provides:ProtectionIdentificationInformationUsage enhancementDisposal enhancementChannel acceptance

enhancement

Labeling Strategies

• Labeling helps customers by:Identifying the manufacturer,

country of origin, ingredientsReporting expiration dates,

content gradingExplaining product useWarning about potential misuseProviding care instructionsServing as a communications link

between the user, eventual buyers, and the company

• Insert table 8.5

PRODUCT MANAGEMENT: MANAGING PRODUCTS THROUGH THEIR LIFE CYCLES

Product modeProduct mode

Price policy Price policy

PlacePlace

PromotionPromotion

ProfitsProfits

PlacePlace

PromotionPromotion

ProfitsProfits

newnew

use skimming or use skimming or penetration strategiespenetration strategies

rapidly building distribution rapidly building distribution networknetwork

build general demandbuild general demand

expected lossesexpected losses

newnew

use skimming or use skimming or penetration strategiespenetration strategies

rapidly building distribution rapidly building distribution networknetwork

build general demandbuild general demand

expected lossesexpected losses

IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline

Product Life Cycle

Price policyPrice policy

PlacePlace

PromotionPromotion

ProfitsProfits

PlacePlace

PromotionPromotion

ProfitsProfits

differentiated productsdifferentiated products

maintain stable pricing policymaintain stable pricing policy

solidify distribution channels and solidify distribution channels and networknetwork

generate secondary demandgenerate secondary demand

start of profitsstart of profits

differentiated productsdifferentiated products

maintain stable pricing policymaintain stable pricing policy

solidify distribution channels and solidify distribution channels and networknetwork

generate secondary demandgenerate secondary demand

start of profitsstart of profits

Product Life Cycle

PlacePlace

PromotionPromotion

ProfitsProfits

PlacePlace

PromotionPromotion

ProfitsProfits

modify product or product usagemodify product or product usage

price reductionprice reduction

increase distribution effortsincrease distribution efforts

concentrate on productconcentrate on product

positioningpositioning

highest profits (peak)highest profits (peak)

modify product or product usagemodify product or product usage

price reductionprice reduction

increase distribution effortsincrease distribution efforts

concentrate on productconcentrate on product

positioningpositioning

highest profits (peak)highest profits (peak)

Product Life Cycle

PlacePlacePromotionPromotion

ProfitsProfits

PlacePlacePromotionPromotion

ProfitsProfits

maintain a basic productmaintain a basic product

maintain pricing or raise pricesmaintain pricing or raise prices

limit distribution effortslimit distribution efforts

cut-back on advertising and cut-back on advertising and sales promotionssales promotions

reduced profitsreduced profits

maintain a basic productmaintain a basic product

maintain pricing or raise pricesmaintain pricing or raise prices

limit distribution effortslimit distribution efforts

cut-back on advertising and cut-back on advertising and sales promotionssales promotions

reduced profitsreduced profits

Product Life Cycle

The Product Diffusion Process

Innovators:Innovators: First purchasers of a new productFirst purchasers of a new product Venturesome, willing to accept risk, socially Venturesome, willing to accept risk, socially aggressive, communicative, and cosmopolitanaggressive, communicative, and cosmopolitan

InnovatorsEarly

Adopters LaggardsEarly

MajorityLate

Majority

2.5%2.5%

Early Adopters:Early Adopters: Are the next customers to buy new productAre the next customers to buy new product Enjoy leadership, prestige, and respect that early Enjoy leadership, prestige, and respect that early purchases bringpurchases bring Tend to be opinion leadersTend to be opinion leaders Adapt new ideas but use discretionAdapt new ideas but use discretion

InnovatorsEarly

MajorityLate

Majority

13.5%13.5%

Early Majority:Early Majority: First part of mass marketFirst part of mass market Outgoing, communicative, and attentive to Outgoing, communicative, and attentive to information cuesinformation cues

InnovatorsEarly

MajorityLate

Majority

34.0%34.0%

Late Majority:Late Majority: Second part of mass marketSecond part of mass market Less cosmopolitan and responsive to changeLess cosmopolitan and responsive to change Include lower economic and social brackets, those Include lower economic and social brackets, those past middle age, and skepticspast middle age, and skeptics

InnovatorsEarly

MajorityLate

Majority

34.0%34.0%

Laggards:Laggards: Last to purchaseLast to purchase Price conscious, suspicious of change, low income Price conscious, suspicious of change, low income and status, tradition bound, and conservativeand status, tradition bound, and conservative Often difficult to market to this small groupOften difficult to market to this small group

InnovatorsEarly

MajorityLate

Majority

16.0%16.0%

Determinants of Rate-of-Adoption

• Relative Advantage• Relative Advantage

• Compatibility

• Complexity

• Triability

• Observability

• The degree to which the innovation appears superior to previous ideas

• Directly related to adoption rates

• Relative Advantage

• Compatibility• Compatibility

• Complexity

• Triability

• Observability

• The degree to which innovation is consistent with the values and experiences of potential adopters

• The higher, the faster the rate-of-adoption

Determinants of Rate-of-AdoptionDeterminants of Rate-of-Adoption

• Compatibility

• Complexity• Complexity

• Triability

• Observability

• The relative difficulty understanding the innovation

• In most cases, the more difficult, the longer it will take to gain general acceptance

• Compatibility

• Complexity

• Triability• Triability

• The degree to which the innovation can be tried on a limited basis

• First adopters face financial loss and ridicule from others lessened by limited trials

• Observability

• Compatibility

• Complexity

• Triability

• Observability• Observability

• The degree to which the results of using the product are observable to others

• Tangible superiority will increase the adoption rate

MANAGING THE PRODUCT PORTFOLIO

• Product Mix – the full set of products across all markets served

• Product Line – the set of products a firm targets to one general market

• Insert Figure 8.11

MANAGING THE PRODUCT PORTFOLIO

Product Growth OpportunitiesP

MarketsMarkets

ExistingExisting NewNew

Product DevelopmentProduct

Diversification

Market Penetration

Market Development

• Market Penetration

• Strategy of increasing sales of existing products in existing markets

Product Growth OpportunitiesProduct Growth Opportunities

Product Growth OpportunitiesProduct Growth OpportunitiesP

MarketsMarkets

Product Development

Product Diversification

Market Penetration Market Development

• Product Development

• Introduction of new products into established markets

MarketsMarkets

Diversification

Market PenetrationMarket

Development

• Market Development

• Strategy of identifying new markets for existing products

MarketsMarkets

Diversification

Market Penetration Market Development

• Product Diversification

• Strategy of offering new products to new markets

Supplemental Material

Alternate Process

Idea GenerationIdea Generation

Screening

Business Analysis

Development

Testing

Commercialization

Sources of ideas:Sources of ideas: sales forcesales force customerscustomers competitorscompetitors supplierssuppliers company personnelcompany personnel retailersretailers wholesalerswholesalers

Alternate Process

Idea Generation

ScreeningScreening

Business Analysis

Development

Testing

Commercialization

Screening criteria:Screening criteria: company objectivescompany objectives production capabilityproduction capability marketing capabilitymarketing capability product riskproduct risk product fitproduct fit

Alternate Process

Idea Generation

Screening

Business AnalysisBusiness Analysis

Development

Testing

Commercialization

Business analysis Business analysis assessment:assessment: financial budgetsfinancial budgets potential marketpotential market growth rategrowth rate

Alternate Process

Idea Generation

Screening

Business Analysis

DevelopmentDevelopment

Testing

Commercialization

Development activities:Development activities: prototypeprototype feasibility testingfeasibility testing preliminary marketpreliminary market strategies strategies

Alternate Process

Screening

Business Analysis

Development

TestingTesting

Commercialization

Testing:Testing: consumer testingconsumer testing test marketingtest marketing simulated testsimulated test marketing marketing

Idea Generation

Alternate Process

Screening

Business Analysis

Development

Testing

CommercializationCommercialization

Commercialization:Commercialization: full-scale productionfull-scale production full-scale marketingfull-scale marketing integration into firmintegration into firm

Idea Generation

Marketing’s role in new product development and product decisions.

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