Download New product development

LECTURE-30
New-Product Development
Strategic Launch Planning
Chapter Questions
 New product development strategy
 New product development process
 Marketing strategy development
 Strategic launch planning
 How brand equity provides value
 The evaluation tasks In the new product process
New-Product Development Strategy
Two ways to obtain new products
Acquisition refers to the buying of a whole
company, a patent, or a license to produce
someone else’s product.
New product development refers to original
products, product improvements, product
modifications, and new brands developed
from the firm’s own research and
development.
What Is a Successful New Product?
Percent of Products that Fail
90
90
80
70
60
50
40
30
20
10
0
40
10
Sometimes Quoted
in Press
Research Reports
Sometimes Claimed
Although you may hear much higher percentages, careful
studies supported by research evidence suggest that
about 40% of new products fail -- somewhat higher for
consumer products, somewhat lower for business-tobusiness products.
New-Product Development
Reasons for new product failure
Overestimation of market size
Poor design
Incorrect positioning
Wrong timing
Priced too high
Ineffective promotion
Management influence
High development costs
Competition
New-Product Development Process
Major Stages in New-Product Development
New-Product Development Process
Idea Generation
Idea generation is the systematic search for newproduct ideas
Sources of new-product ideas
 Internal
 External
New-Product Development Process
Idea Generation
Internal sources refer to the
company’s own formal
research & development,
management and staff.
External sources refer to
sources outside the
company such as
customers, competitors,
distributors, suppliers.
New-Product Development Process
Marketing Strategy Development
 Marketing strategy development refers to the
initial marketing strategy for introducing the
product to the market.
 Marketing strategy statement includes:
 Description of the target market
 Value proposition
 Sales and profit goals
New-Product Development Process
Marketing Strategy Development
Business analysis involves a review of the sales,
costs, and profit projections to find out whether
they satisfy the company’s objectives
New-Product Development Process
Marketing Strategy Development
Product development
involves the creation and
testing of one or more
physical versions by the
R&D or engineering
departments
 Requires an increase in
investment
New-Product Development Process
Marketing Strategy Development
Test marketing is the
stage at which the
product and
marketing program
are introduced into
more realistic
marketing settings.
Provides the marketer
with experience in
testing the product
and entire marketing
program before full
introduction.
New-Product Development Process
Marketing Strategy Development
Commercialization is the introduction
of the new product
 When to launch
 Where to launch
 Planned market rollout
Managing New-Product Development
Successful new-product development should
be:
 Customer centered
 Team centered
 Systematic
Strategic Launch Planning
Some Important corporate decisions.
 A specified gross margin: Affects funding.
 Speed-to-market: Affects promotional outlays and
schedules.
 Commitment to a given channel: Affects
distribution plan.
 Advertising policy: Affects promotion decisions.
 Pricing policy: Affects decision to use penetration
or skimming pricing (slide down demand curve).
Revision of Pre-determined Goals
 Customer Acceptance
Goals
 Customer Acceptance
 Customer Satisfaction
 Sales
 Market Share
 Financial Performance
Goals
 Time to break even
 Margins
 Profitability (IRR, ROI)
 Product Level
Performance Goals
 Product Cost
 Time to Market
 Product Performance
 Quality Guidelines
 Other
 Competitive Effect
 Image Change
 Morale Change
Strategic Platform Decisions
 Permanence
 Permanent, stand-alone.
 Permanent, but as a bridge to other items -- e.g.,

platform strategy.
Temporary. Given firms’ tendency to develop
streams of products, more and more new products
are actually only temporary.
 Aggressiveness
 Aggressive versus cautious attitude at entry
 Type of Demand Sought
 Primary versus selective
Strategic Platform Decisions
 Competitive Advantage
 Differentiation, price leadership, or both
 Competitive Relationship
 Aim at a competitor, avoid a competitor
 Image
 Create a new image, tweak an existing image, use
the already-existing image
Product Line Replacement Strategies
Butt-on product
replacement
Low-season
switch
High-season
switch
Roll-in, roll-out
Downgrading
Splitting
channels
The existing one is simply dropped when the new one is
announced. Example: Ford's marketing of Mondeo and
dropping of Sierra.
Same as butt-on, but arranging the switch at a low point
between seasons. Tour companies use this switch when they
develop their new catalogs.
Same as butt-on, but arranging the new item at the top of a
season. Example: Polaroid used this strategy often, putting
new replacement items out during the Christmas season.
Another version of butt-on, but arranged by a sequence of
market segments. Mercedes introduced its C series country
by country.
Keeping the earlier product along side the new, but with
decreased support. Example: The 386 chip stayed along
side the 486, until the Pentium was introduced.
Putting the new item in a different channel or diverting the
existing product into another channel. Example: Old
electronic products often end up in discounter channels.
Scope of Market Entry
This is not test marketing. This is launch. All
forces in place and working.
 Roll out slowly -- checking product, trade and
service capabilities, manufacturing fulfillment,
promotion communication, etc.
 Roll out moderately -- but go to full market as
soon as volume success seems assured.
 Roll out rapidly -- full commitment to total
market, restricted only by capacity.
The Target Market Decision
 Alternative ways to segment a market
 End-use, geographic/demographic,
behavioral/psychographic, benefit segmentation
 Micromarketing and mass customization
 Also consider the diffusion of innovation
Product Positioning




Who -- Why -- How
To whom are we marketing?
Why should they buy it?
How do we best make the claim?
Why Should They Buy It?
 “How likely would you be to buy this if we
marketed it?”
 Formatted in three ways:
 Solves major problem current products do
not.
 Better meet needs and preferences.
 Lower price than current items.
How Do We Make the Claim?
 Product positioning statement is a strategic driver
--a core item -- not a list of advantages. Some
new products get one short sentence -- technical
items more.
 Can be stated as one or more features (what it is).
 Can be stated as a function (how it works).
 Can be stated as one or more benefits (how the
user gains).
 Can be stated as a surrogate (no features,
functions, benefits).
Branding Decisions
 What is the brand’s role or purpose?
 Are you planning a line of products?
 Do you expect a long-term position in the
market?
 How good is your budget?
 Physical/sensory qualities of brand considered?
 Message clear and relevant?
 Is Insulting or irritating to anyone?
How Brand Equity Provides Value
High
Brand
Loyalty
High
Brand
Awareness
High
Perceived
Quality
More/Better
Brand
Associations
Reduced
marketing
costs
Easier to
make
brand
associations
Supports
quality
positioning
Creates
positive
image
Patents or
trademarks
Supports
higher-price
strategy
Helps
customer
process
information
Strong
channel
relationships
Increased
trade
leverage
Increased
liking and
familiarity
Other Brand
Assets
Provides value to customer:
Provides value to firm:
Assists in customer information processing
Increases confidence in purchase
Increases satisfaction in product use
Increases effectiveness of marketing programs
Increases customer loyalty and trade leverage
Facilitates brand extensions
Is a source of competitive advantage
Building Brand Equity
 Getting awareness of the brand and the
meaning.
 Making brand associations
 Building perceived quality
 Loyalty in repurchase
 Getting reseller support
The Evaluation Tasks In The New
Product Process
New product Process Phase
Opportunity
Identification/Selection
Evaluation Task
Direction:
Where should we look?
Concept Generation
Initial Review:
Is the idea worth screening?
Concept/Project
Evaluation
Full Screen:
Should we try to develop it?
Development
Launch
Progress Report:
Have we develop it? If not, should
we continue to try?
Market Testing:
Should we market it? If so, how?
In retrospect
Bibliography
 Marketing Management – A South Asian Perspective
by Philip Kotler, Kevin Lane Keller, Abraham Koshy &
Mithileshwar Jha, 13th Edition, Published by Pearson
Education, Inc.
 New Product Management by Merle Crawford and
Anthony Di Benedetto, 9th Edition McGraw Hill Irwin.
 Principles of Advertising & IMC by Tom Duncan 2nd
Edition, Published by McGraw-Hill Irwin.
 Principles of Marketing by Philip Kotler & Gary Armstrong
Thirteenth Edition, Published by Prentice Hall
The End:
Don’t use time or words
carelessly.
Neither can be retrieved.