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CHAPTER 11

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  1. CHAPTER 11 DEVELOPING NEW MARKET OFFERINGS

  2. IMPORTANT TOPICS OF THIS CHAPTER • What is a New Product? • Challenges in New Product Development (NPD) • Organizational Structure & NPD • Stages & Management of NPD • Diffusion & Adaption of New Products

  3. NEW PRODUCTS • New-to-the-World Products(10%) • New Product Lines/Functions/Applications (20%) • Additions to Existing Product Lines(26%) • Improvements and Revisions of Existing Products(26%) • Repositioning(7%) • Cost Reductions(11%)

  4. CAUSES OF NEW PRODUCT FAILURE • Failure in Market Research Findings • Overestimated Demand and Size of Market • Design Failure • Positioning Problem • Ineffective Communication/Promotion • High Development Cost/ Price • Pressure from Competitors • Poor Timing

  5. CAUSES OF NEW PRODUCT SUCCESS • Technological Superiority • Easy of Market Entry • Competitive Advantage • Size and Speed in Market growth • Identifying Needs/Wants and Good Timing • Effective Promotion/Communication • Uniqueness of the Concept/Product • Marketing and Managerial Synergy/Team Effort

  6. CHALLENGES IN NEW PRODUCT DEVELOPMENT • Shortage in New Product Ideas • Fragmented Markets • Social and Governmental Constraints • High Development Cost • Shortage of Cash/Capital • Faster Development Time • Shorter Product Life Cycle

  7. EFFECTIVE ORGANIZATIONAL ARRANGEMENTS • Top Management: • R&D Budget. • Organization for New-Product Development: • Product managers • New Product Managers • New Product Committee • New Product Departments: • R&D. • New Product Venture Team

  8. THE NEW-PRODUCT DEVELOPMENT PROCESS • Idea Generation: • Sources of new ideas: • Customers’ needs and wants, scientists and engineers, competitors, sales force and channels, top management, universities and research firms. • Idea Screening: • Idea manager • Idea committee: • DROP-error • GO-error

  9. THE NEW-PRODUCT DEVELOPMENT PROCESS • Concept Development and Testing: • Concept development: • Category concepts • Product-positioning map • Brand positioning map turns into brand concept • Concept testing • Virtual reality. • Customer-driven engineering: • Incorporating customer preferences into final engineering design.

  10. Expensive High price/oz. Brand C Cold cereal Bacon and eggs Quick High in calories Slow Low in calories Pancakes Instant breakfast Brand B Hot cereal Brand A Inexpensive Low price/oz. Product & Brand Positioning (a) Product-positioning map (breakfast market) b) Brand-positioning map (instant breakfast market)

  11. THE NEW PRODUCT DEVELOPMENT PROCESS • Marketing Strategy Development: • Size of market, structure, behavior, market share and short-run profit goals • Pricing and distribution strategy • Long-run sales and profit goals. • Business Analysis: • Sales, cost and profit projections: • Estimating total sales: • First-time sales. • Replacement sales. • Repeat sales. • Estimating costs and profits: • Cost of goods sold, gross margin, gross contribution, net contribution, discounted contribution and pay back period, break-even analysis, risk analysis.

  12. THE NEW PRODUCT DEVELOPMENT PROCESS • Product Development: • Physical version of the product: • Functional test (alpha testing) • Customer test (beta testing) • Measuring consumer preferences: • Rank-order. • Paired comparison. • Monadic rating.

  13. THE NEW PRODUCT DEVELOPMENT PROCESS • Market Testing: • Consumer-goods market testing: • Trial, first repeat, adoption and purchase frequency: • sales-wave research-trying with no cost to consumer. • simulated test marketing. • controlled test marketing. • test markets- reliable forecasts, testing the marketing mix: • how many cities. • which cities. • length of test. • what information to learn. • what action to take-trial and repurchase rate.

  14. Consumer-Goods Market Testing 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 Test offering trail to a sample of consumers in successive periods. Standard Test Market Full marketing campaign in a small number of representative cities.

  15. THE NEW PRODUCT DEVELOPMENT PROCESS • Business goods market testing: • Alpha testing • Measure and improve product performance. • Beta testing: • Testing in customer’s site • Trade shows • Dealers’ showroom. • Commercialization: • Timing: • First entry. • Parallel entry. • Late entry.

  16. NEW PRODUCT DEVELOPMENT PROCESS • Commercialization (cont.): • Geographical strategy: • Single locality • Regional • National • Global • Target-market prospects: • Users • Nonusers • Opinion leaders • Strategic model: • Critical path.

  17. THE CONSUMER ADOPTION PROCESS • Early strategies: • Mass-market approach, • Heavy-user target market. • Early adopter theory: • Time laps between exposure and trials. • Influence to early adopter: • Media exposure. • Early adopter as opinion leader. • Stages in adoption: • Awareness. • Interest. • Evaluation. • Trial. • Adoption.

  18. THE CONSUMER ADOPTION PROCESS (CONT.) • Factors influencing the adoption process: • People’s readiness: • Adopter Categories: • Innovator(2.5%) • Early Adopters(13.5%), • Early Majority (34%), • Late Majority(34%). • Laggards(16%). • Personal Influence: • More important at the evaluation stage, and on late adopters than the early adopters.

  19. 34% Late majority 34% Early majority 13 1/2% Early adopters 16% Laggards 2 1/2% Innovators Adopter Categorization of the Basis of Relative Time of Adoption of Innovations Time of adoption innovations

  20. INFLUENCING FACTORS TO ADOPTION PROCESS • Characteristics of the Innovation affect rate: • Relative advantage • Compatibility • Complexity • Divisibility • Communicability • Organizations to Adopt Innovation: • Environmental factors • Organizational factors: • Progressiveness. • Size. • Pressure.