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consumer behaviorconsumer behavior
TargetTargetmarketingmarketing
MkgMkgenvironmentenvironment
Strategy planningStrategy planning
segmentationsegmentation
positioningpositioning
ProductProduct
The exchange objectThe exchange object
Marketing Strategy Planning:Marketing Strategy Planning:
Identification of Target MarketsIdentification of Target Markets
Developing Appropriate Developing Appropriate Marketing Mix For the TargetMarketing Mix For the TargetMarket(s).Market(s).
ProductProduct
PromotionPromotion
placeplace
priceprice
Systems Approach to Policy Systems Approach to Policy DecisionsDecisions
What do we mean by new What do we mean by new products?products?
Joseph Schumpeter envisionedJoseph Schumpeter envisionedinnovation as being characterizedinnovation as being characterizedby (1) construction of new plants;by (1) construction of new plants; (2) introduction of new firms;(2) introduction of new firms;& (3) the rise to leadership of new& (3) the rise to leadership of new man. man. From this point of view innovationFrom this point of view innovationin a in a discontinuousdiscontinuous events. events.
An innovation is an idea perceived An innovation is an idea perceived as new by the individual. as new by the individual.
Everett RogersEverett Rogers
The operational definition:The operational definition:any form of a product that has any form of a product that has recently become availablerecently become availablein a market.in a market.
What is new product?What is new product?from developers view:from developers view:
New- to-the world productsNew- to-the world productsNew category entries, e.g. P & GNew category entries, e.g. P & G first first shampooshampooAddition to product lines Liquid TideAddition to product lines Liquid TideProduct improvementsProduct improvementsRepositioning,e.g., Arm and HammerRepositioning,e.g., Arm and Hammer baking soda, as drain deodorant baking soda, as drain deodorant
1. Continuous innovations1. Continuous innovations2. Dynamically continuous2. Dynamically continuous innovationsinnovations3. Discontinuous innovations3. Discontinuous innovations
Innovations may be classified as:Innovations may be classified as:
Continuous innovations:Continuous innovations:
has the least disrupting has the least disrupting influence on establishedinfluence on establishedconsumption patterns.consumption patterns.
Dynamically ContinuousDynamically ContinuousInnovation:Innovation:
has more disrupting effects thanhas more disrupting effects thancontinuos innovation, althoughcontinuos innovation, althoughit still does not generally alterit still does not generally alterestablished patternsestablished patterns
Discontinuous InnovationsDiscontinuous Innovations
involves the establishmentinvolves the establishmentof new behavior pattern.of new behavior pattern.
Nature of InnovationNature of Innovation
NoNo
Cont.Cont.Innov. Innov.
DynamicallyDynamicallyContinuous Continuous InnovationsInnovations
ChangeChange
RadicalRadicalChangeChange
DiscontinuousDiscontinuousinnovationsinnovations
behavior patternbehavior pattern
Importance of new productsImportance of new products
P.L.C.P.L.C.
Growth, ProfitabilityGrowth, Profitability
Competition Competition
The new-productThe new-productdevelopment dilemmadevelopment dilemma
High R & D costsHigh R & D costsHigh attrition rate of new High attrition rate of new product product ideasideasHigh rate of market failureHigh rate of market failureShorter life spans of successfulShorter life spans of successfulproductproduct
cont.cont.
Costliness of new productCostliness of new productdevelopment processdevelopment process
Social and governmentSocial and governmentconstraints.constraints.
Fragmented MarketsFragmented Markets
Dilemma: cont.Dilemma: cont.
COST OF NEW PRODUCT COST OF NEW PRODUCT FAILURESFAILURES
Product EstimatedProduct Estimated
loss (mil)loss (mil)
RCA’s Selectavision $300.00RCA’s Selectavision $300.00Ford’s Edsel 350.00Ford’s Edsel 350.00Du Pont’s Corfam 100.00 Du Pont’s Corfam 100.00
Scott Paper Co. Baby S. 12.8Scott Paper Co. Baby S. 12.8General Food’s FreezeGeneral Food’s FreezeDried fruit cereals 5.0Dried fruit cereals 5.0Hunt’s pizza and hickoryHunt’s pizza and hickoryflavored catsup's 11.2flavored catsup's 11.2American Home’s easy-offAmerican Home’s easy-offHousehold cleaner .8 Household cleaner .8
Stage No. of Cost per Total Stage No. of Cost per Total Ideas P. idea Cost Ideas P. idea Cost
1. Idea 1. Idea 6464 1000 $64,000 1000 $64,000 ScreeningScreening2. Concept 2. Concept 1616 20,000 $320,000 20,000 $320,000 TestingTesting3. Product 3. Product 8 8 200,000 $1,600,000 200,000 $1,600,000 Development Development
Costliness of New ProductCostliness of New Product Development processDevelopment process
4. Test 4. Test 44 500,000 $2,000,000 500,000 $2,000,000 Mkg.Mkg.5. National 5. National 22 5,000,000 $10,000,000 5,000,000 $10,000,000 LaunchLaunch
Total $13,984,000Total $13,984,000
New Product DevelopmentNew Product DevelopmentAlternativesAlternatives
1. Co. laboratories1. Co. laboratoriesa.a. InternalInternal2. independent2. independent research firmsresearch firms
b. Externalb. External 1. acquisition1. acquisition 2. patents and 2. patents and licenseslicenses
3. new product3. new productconsultantsconsultants
Initiating FactorsInitiating Factors
1. Product life cycle1. Product life cycle
2. Technology2. Technology
3. Changing consumer taste3. Changing consumer taste
New Product Development New Product Development ProcessProcess
New Product Development New Product Development ProcessProcess
IdeaIdeaGenerationGeneration
ConceptConceptDevelopmentDevelopmentand Testingand Testing
MarketingMarketingStrategyStrategy
DevelopmentDevelopment
IdeaIdeaScreeningScreening
BusinessBusinessAnalysisAnalysis
ProductProductDevelopmentDevelopment
MarketMarketTestingTesting
CommercializationCommercialization
Sources of new ideasSources of new ideas
customerscustomerstechnologytechnologycompetitioncompetitionemployeesemployees
executivesexecutivesco. scientistsco. scientistsinventorsinventors othersothers
customerscustomerstechnologytechnologycompetitioncompetition
executivesexecutivesco.co.scientistsscientistsothersothers
managermanagerof of ideaidea
processprocess
Sources of new ideasSources of new ideas
customers, scientists, customers, scientists, competitorscompetitors
Idea-generating devicesIdea-generating devices attribute listingattribute listing brainstormingbrainstorming morphological analysismorphological analysis (structural analysis)(structural analysis)
Screening new product ideasScreening new product ideas
Criteria for ScreeningCriteria for ScreeningTo avoid making two types of To avoid making two types of errorserrors1. Rejecting an idea that could1. Rejecting an idea that couldbecome a very successfulbecome a very successfulproductproduct2. Accepting an idea that later2. Accepting an idea that laterfails fails
Concept DevelopmentConcept Developmentand Testingand Testing
New Product IdeaNew Product IdeaNew Product ConceptNew Product ConceptNew Product ImageNew Product Image
According to Kotler:According to Kotler:
A product idea is a possible productA product idea is a possible productthat the company that the company mightmight offer to the offer to themarket.market.A product concept is an elaborateA product concept is an elaborateversion of the idea expressed inversion of the idea expressed inmeaningful consumer terms.meaningful consumer terms.A product image is the consumers’A product image is the consumers’perceptionperception of product concept. of product concept.
B.L.D. as an exampleB.L.D. as an example
Product IdeaProduct Idea: a powder to be: a powder to beadded to milk or water.added to milk or water.
Product Concept:Product Concept:
Who will use the product:Who will use the product:Teenagers, young or adult, Teenagers, young or adult, middle-aged adults?middle-aged adults?
When it will be used?When it will be used?Breakfast, lunch, afternoon, Breakfast, lunch, afternoon, dinner time, late evening?dinner time, late evening?
1.1. concept oneconcept one:: an instant break-an instant break- fastfast2.2. concept twoconcept two: a tasty snack drink: a tasty snack drink for childrenfor children3.3. concept threeconcept three: a health : a health supplement for adults.supplement for adults.
Note:Note:
Each of the above conceptsEach of the above concepts represents a represents a categorycategory concept concept
i.e., each positions the idea withini.e., each positions the idea withina a categorycategory..
It is the category concept, not theIt is the category concept, not theproduct concept that defines theproduct concept that defines theproduct’s competition.product’s competition.
Business AnalysisBusiness Analysis
1. Break-even analysis1. Break-even analysisS =S =
BEBE
TFCTFC
P -VCP -VCUU UUNOTE: B.E. is not a NOTE: B.E. is not a
forecasting method!forecasting method! $$S2S2SS
BEBE
Q1Q1 Q2Q2 QQFCFC
TCTC
P=(S -S )(P -VC )P=(S -S )(P -VC )aa BEBE UU UU
Product DevelopmentProduct Development
1. Building prototype models1. Building prototype models2. Functional testing2. Functional testing3. The issue of product design3. The issue of product design *interaction between marketing and*interaction between marketing and development personneldevelopment personnel *consumer preferences*consumer preferences *product features*product features
*functional and consumer*functional and consumer testingtesting
Market TestingMarket Testing
Simulated store techniqueSimulated store techniqueControlled test marketingControlled test marketing
How many cities?How many cities?Which cities?Which cities?Length of test?Length of test?What information?What information?
Test Test marketsmarkets
CommercializationCommercialization
Main Questions:Main Questions:When (timing)When (timing)
first entry first entry (first mover advantage)(first mover advantage)
parallel entryparallel entrylate entrylate entry
Where?Where?
(Geographical Strategy(Geographical StrategyLocal, region, nationalLocal, region, nationalinternational?international?
To whom?To whom? (target market)(target market)
Adoption processAdoption processis ais a micro processmicro process
AwarenessAwarenessInterestInteresttrialtrialadoptionadoption
Diffusion of InnovationsDiffusion of Innovations
Four basic elements ofFour basic elements ofdiffusion processdiffusion process
1. Innovation1. Innovation2. The Communication of 2. The Communication of innovation among individualsinnovation among individuals3. The social system3. The social system4. Time4. Time
The Social System:The Social System:
The time:The time:the diffusion of new product the diffusion of new product adoption is a temporal phenomenonadoption is a temporal phenomenon
Diffusion as a process rather thanDiffusion as a process rather thanan event.an event.
Product characteristicsProduct characteristicsaffecting diffusion rateaffecting diffusion rate
1. Complexity:1. Complexity: functional or attribute complexityfunctional or attribute complexity trade off complexitytrade off complexity2.2. Relative advantageRelative advantage3.3. ObservabilityObservability4. Perceived risk 4. Perceived risk 5. Trialability5. Trialability6. Compatibility6. Compatibility
7.7. Type of groupType of group ((Young, affluentYoung, affluent and highly educated accept changeand highly educated accept change including new products).including new products).
8.8. Type of DecisionType of Decision ((Group vs Group vs individual decision)individual decision)9.9. Fulfillment of a needFulfillment of a need
Diffusion EnhancementDiffusion Enhancement StrategiesStrategies
Diffusion Diffusion DiffusionDiffusion Diffusion DiffusionDeterminant Inhibitor Determinant Inhibitor EnhancementEnhancement StrategiesStrategies
1.Nature of 1.Nature of ConservativeConservative GroupGroup
Reach other markets;Reach other markets;Target innovators within groupTarget innovators within group
Diffusion EnhancementDiffusion Enhancement StrategiesStrategies
Diffusion Diffusion DiffusionDiffusion Diffusion DiffusionDeterminant Inhibitor Determinant Inhibitor EnhancementEnhancement StrategiesStrategies
Type of GroupType of GroupDecisionDecision
Choose media to reach all deciders;Choose media to reach all deciders;Provide conflict reduction themesProvide conflict reduction themes
Diffusion EnhancementDiffusion Enhancement StrategiesStrategies
Diffusion Diffusion DiffusionDiffusion Diffusion DiffusionDeterminant Inhibitor Determinant Inhibitor EnhancementEnhancement StrategiesStrategies
Marketing LimitedMarketing LimitedEffortEffort
Use regional rollout; target innovatorsUse regional rollout; target innovatorswithin groupwithin group
Diffusion EnhancementDiffusion Enhancement StrategiesStrategies
Diffusion Diffusion DiffusionDiffusion Diffusion DiffusionDeterminant Inhibitor Determinant Inhibitor EnhancementEnhancement StrategiesStrategies
Felt Need WeakFelt Need Weak
Extensive Advertising ShowingExtensive Advertising Showingimportance of benefitsimportance of benefits
Diffusion EnhancementDiffusion Enhancement StrategiesStrategies
Diffusion Diffusion DiffusionDiffusion Diffusion DiffusionDeterminant Inhibitor Determinant Inhibitor EnhancementEnhancement StrategiesStrategies
Compatibility ConflictCompatibility Conflict
Stress Attributes Consistent withStress Attributes Consistent withvalues and normsvalues and norms
Diffusion EnhancementDiffusion Enhancement StrategiesStrategies
Diffusion Diffusion DiffusionDiffusion Diffusion DiffusionDeterminant Inhibitor Determinant Inhibitor EnhancementEnhancement StrategiesStrategies
Relative LowRelative Lowadvantageadvantage
Lower Price; Redesign ProductLower Price; Redesign Product
Diffusion EnhancementDiffusion Enhancement StrategiesStrategies
Diffusion Diffusion DiffusionDiffusion Diffusion DiffusionDeterminant Inhibitor Determinant Inhibitor EnhancementEnhancement StrategiesStrategies
Observibility LowObservibility Low
Use extensive advertisingUse extensive advertising
Diffusion EnhancementDiffusion Enhancement StrategiesStrategies
Diffusion Diffusion DiffusionDiffusion Diffusion DiffusionDeterminant Inhibitor Determinant Inhibitor EnhancementEnhancement StrategiesStrategies
Trialability LowTrialability Low
Use free samples to early adoptersUse free samples to early adoptersspecial prices to rental agenciesspecial prices to rental agencies
Diffusion EnhancementDiffusion Enhancement StrategiesStrategies
Diffusion Diffusion DiffusionDiffusion Diffusion DiffusionDeterminant Inhibitor Determinant Inhibitor EnhancementEnhancement StrategiesStrategies
PerceivedPerceived risk High risk High
Success documentationSuccess documentationendorsement by credible sourcesendorsement by credible sourcesGuaranteesGuarantees
Adoption processAdoption processis a micro processis a micro process
AwarenessAwarenessInterestInteresttrialtrialadoptionadoption
ActionAction
AwarenessAwareness
InterestInterest
AdoptionAdoption
TrialTrial
cognitioncognition
affection affection
2 1/2%Innovators
13 1/2%Early
adopters
34%Early
majority
34%Late
majority
16%Laggards
Time of adoption innovations
Adopter Categorization of the Basis of Adopter Categorization of the Basis of Relative Time of Adoption of InnovationsRelative Time of Adoption of Innovations
Adopter Categorization of the Basis of Adopter Categorization of the Basis of Relative Time of Adoption of InnovationsRelative Time of Adoption of Innovations
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