Post on 13-May-2015
Managing The Marketing Mix
Lecture 2:Product and New Product Development
Dr. Martin J. LiuLecturer in Marketing
Review
Marketing Mix:The set of controllable tactical marketing tools: product, price,place and promotion that the firm blends to produce theresponse it wants in the target market.
Marketing mix is a basic tool to identify Product positioningand Segmenting the Market.
Product Positioning:The way that product is defined by consumers on importantattributes - the place the product occupies in consumer’s mindsrelative to competing products. i.e. Symbolic, Functional andExperiential.
Market Segmentation:The process of evaluating each market segment’sattractiveness and selecting one or more segments to enter.
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary
What is A Product?
Bundle of physical, service, and symbolicattributes designed to enhance buyers’ wantsatisfaction.
Introduction
What is aproduct?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary
Types of Products
• Actual product
– Quality level
– Features
– Design
– Package
– Brand name
• Augmented product
– Installation
– After-sale service
– Warranty
– Delivery and credit
– Attached benefit
• Consumer Products
– Convenience products
– Shopping products
– Specialty
– unsought
• Industrial Products
– Material and parts
– Capital items
– Supplies and services
Introduction
What is aproduct?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary
New Products CommonlyAccepted Categories
New Products
New CategoryEntries
New-to-the-world Products New Product Lines
Repositioning
Addition toExisting Lines
Introduction
What is aproduct?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary
Factors Influencing New ProductDevelopment Success
Technological factors
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary
Risk in New Product Development
• NPD is a high risk activity
– Aprox. 90% of new products fail
– Only aprox. 40% of new consumer products that are brought tomarket will be around 5 years later
– Industrial markets 35-65% failure rate
– Pharmaceutical firms spend on average E400m per drug
• Innovation takes time
– Biotechnology average 10 years of development
• Why do new products fail?
– Failure to understand consumer needs
– Undefined market
– Undifferentiated products
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary
The Eight Stags of New ProductsDevelopment Process
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary
The Eight Stags of New ProductsDevelopment Process
• (1) New Product Strategy
– Guideline for resource allocation
– Sets up key criteria against which projects can be managed
• (2) Idea Generation
– The search for innovative ideas and a process for themanagement of ideas
• (3) Screening
– Initial assessment of demand for the ideas generated
– Ideas acceptable for further development
• (4) Concept Development and Testing
– Content & form of idea
– Development of a variety of concepts
– Tested for compatibility with production plant
– Tested for compatibility with customer needs/tastes
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary
The Eight Stags of New ProductsDevelopment Process
• (5) Business Analysis
– Market analysis, break even volume, technical costs,production implications. Fit with corporate objectives
• (6) Product Development & Testing
– Determine the validity of the theoretical product, e.g.,Innocent Smoothies made & tested fresh fruit smoothies at amusic festival.
– Prototypes-alterations to specifications.
• (7) Test Marketing
– Small scale tests with customers.
– N.B. test marketing is not always feasible or desirable.
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary
The Stage and Gate Model (Cooper 1993)
Manage risk by screening at review points.
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary
Commercialization
• Product launch considerations and strategies:
–Degree of novelty of product/service
–Familiarity/ position in intended market
–Competition; status/ anticipated reaction
• Timing
–Diffusion theory and new product acceptance.
–Identify the early adopters
• Communications
–Internal and external
• Monitoring the launch
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary
Product Life Cycle (PLC)
• A way to trace the stages of a product's acceptance from itsintroduction to its demise.
• One of the most familiar concepts in marketing
• A prevalent marketing management tool
• Refers to the life of the product category.
• The time a product category spends in a stage of the productlife cycle may vary from a few weeks to decades.
• Does not predict how long a product category will remain inany one stage
• A tool to help marketers understand:
– where their product is now
– what may happen
– which strategies are normally appropriate.
Introduction
What is a product?
New ProductDevelopment
Product LifeCycle (PLC)
Diffusion ofInnovation Cycle
Summary
Sales/Profits
Time
Development Introduction Growth Maturity Decline
Product Life Cycle (PLC)
Limited Life Cycle
Rejuvenation
Product Life Cycle
Break Even
Losses
Profits
Examples of PLC: High Learning Product
• Significant education of thecustomer is required;
• Extended introductoryperiod.
Introduction
What is a product?
New ProductDevelopment
Product LifeCycle (PLC)
Diffusion ofInnovation Cycle
Summary
Examples of PLC: Low Learning Product
• Sales begin immediately;
• Little learning is requiredby the consumer;
• Benefits of purchase arereadily understood .
Introduction
What is a product?
New ProductDevelopment
Product LifeCycle (PLC)
Diffusion ofInnovation Cycle
Summary
Examples of PLC: Fashion Product
• Most often appear inwomen’s and men’sclothing styles;
• Length of the cycles maybe years or decades.
Introduction
What is a product?
New ProductDevelopment
Product LifeCycle (PLC)
Diffusion ofInnovation Cycle
Summary
Examples of PLC: Fad Product
• Rapid sales on introduction
• Equally rapid decline;
• Often novelties and have ashort life cycle.
Introduction
What is a product?
New ProductDevelopment
Product LifeCycle (PLC)
Diffusion ofInnovation Cycle
Summary
Diffusion of An Innovation
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovationCycle
Summary
Crossing the Chasm
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovationCycle
Summary
ProcessInnovation
Line ExtensionInnovation
Business ModelInnovation
MarketingInnovation
IntegrationInnovation
Innovating for Mature Markets
ExperientialInnovation
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovationCycle
Summary
Summary
• There are four main types of new products that can belaunched
• NPD is a high risk/ high reward activity
• A formal review process with review points and a clear newproduct strategy underlying the process leads to greatersuccess
• Product life cycle (PLC) and diffusion of innovation.
• A strong market orientation and understanding oftechnological opportunities is key.
Introduction
What is a product?
New ProductDevelopment
Product Life Cycle(PLC)
Diffusion ofInnovation Cycle
Summary