KOTLER Mm.18.10

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Marketing ManagementMBA CP 205

1Prof. U.M. Amin, CMS, JMI University, New Delhi

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Introducing New Market Offerings


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Learning Objectives:

• Know what challenges a company faces in developing new products.• Know what are the main stages in developing new products.• Know what is the best way to set up the new product development process.• Know what factors affect the rate of diffusion and consumer adoption of newly launched products.


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• Marketers play a key role in the new product development process by identifying and evaluating new product ideas and working with R & D and other departments in every stage of development.

• A company can add new products through acquisition or development.

• A company can buy other company, buy patent or it can buy a license or franchise from other company.

• Development route can take two forms: develop in own laboratory or the firm can contract with independent research or product development firms.


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Categories of new products


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New-to-the-world

Cost reductions

New product lines

Additions

Improvements

Repositionings

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Categories of new products:

• New to the world products: New products that create an entirely new market.

• New product lines: New products that allow a company to enter an established market for the first time.

• Additions to existing product lines: New products that supplement a company’s established product lines, (new sizes & flavors etc.)

• Improvements and revisions of existing products: New products that provide improved performance or greater perceived value and replace existing products.


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Categories of new products (contd.):

• Repositioning: Existing products that are targeted to new markets or market segments.

• Cost reductions: New products that provide similar performance at lower cost.

Reasons for failure of new product:

• Higher management personnel may push a favorite idea in spite of negative market research findings.

• The idea is good but the market demand is overestimated.

Prof. U.M. Amin, CMS, JMI University, New Delhi


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• Poor product design.• Incorrect positioning.• Ineffectively advertised.• Wrongly priced.• Insufficient distribution support.• Development costs are higher than expected.• Competitors fight back harder than expected.• Shortage of important ideas in certain areas (Steel & Detergents). • Shortage of funds.• Shorter product life cycles.



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Stages of new Product development:

1. Idea generation.

2. Idea screening.

3. Concept development and testing.

4. Marketing Strategy development.

5. Business analysis.

6. Product development.

7. Market testing

8. CommercializationProf. U.M. Amin, CMS,

JMI University, New Delhi


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1. Idea generation

Is theidea worthconsidering?

2. Ideascreening

Is theproduct idea com-patible with company objectives,strategies & resources?

3 Concept developmentand testing

Can we find a good concept for theproduct that consumerssay theywould try?

4. Marketingstrategydevelopment

Can we find a costeffective,affordablemarketing Strategy?

5. Businessanalysis

Will thisproductmeet ourprofit goal?

6. Productdevelopment

Have wedeveloped atechnicallyandcommerciallysoundproduct?

7. Markettesting

Haveproductsalesmetexpectations?

8. Commer-cializaton

Areproductsalesmeetingexpectations?

DROP

Wouldit helpto modifythe productor marketingprogram?

Should wesend theidea backfor productdevelopment?

Lay future plans

NoNo No No No No NoNo

NoNo

Yes

Yes

Yes Yes Yes Yes Yes Yes Yes

Yes



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1. Idea generation:

• Marketers should define the product & market scope and the new product’s objectives.

• Customers needs and wants are the logical place to start the

search for ideas.

• New product ideas can come from many sources: customers,

scientists, competitors, employees, channel members and top

management.

• Other sources include inventors, industrial consultants, marketing research firms and industrial publications.



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Idea generation: Creativity techniques



• Attribute listing.• Forced relationships.• Morphological analysis.• Reverse assumption

analysis.• New contexts.• Mind mapping.

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• Attribute listing: List and then modify attributes.

• Forced relationships: List several ideas and consider each one in relation to each other one.

• Morphological analysis: Start with a problem, then think of dimensions. By listing every possible combination, many new solutions can be generated.

• New contexts: Take familiar processes and put them into a new context.

• Mind mapping: Involves starting with a thought and thinking of next thought that comes up and linking it with the initial thought and so on.



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2. Idea screening:

• While screening ideas, two types of errors should be avoided: a DROP-error and a GO error.

• DROP error occurs when the company dismisses an otherwise good idea. If a company makes too many drop errors, its standards are conservative.

• GO error occurs when the company permits a poor idea to move into development and commercialization - leads to product failure.

• Product failures are of three types: Absolute, Partial and Relative product failures.



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• An absolute product failure loses money, its sales do not cover variable costs.

• A partial product failure loses money but its sales cover all its variable costs and some of its fixed costs.

• A relative product failure yields a profit that is less than the company's target rate of return.

• The purpose of idea screening is to drop ideas as soon as possible lest it proves too expensive.



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3. Concept development and testing:

• Attractive ideas must be refined into testable product concepts.

• A product idea is a possible product a company might offer while product concept is an elaborated version of the idea expressed in meaningful consumer terms.

• Product concept involves creating product positioning and brand positioning maps.

• Concept testing involves presenting the product concept to the target consumers and getting their feed back.



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Concepts in concept development


• Product idea• Product concept• Category concept• Brand concept• Concept testing

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• The concepts can be presented symbolically or physically.

• Computer aided design and manufacturing programs has enabled companies to build inexpensive prototypes of products quickly.

• Consumer preferences for alternative products can be measured through conjoint analysis that involves deriving the utility values that consumers attach to various levels of product attributes.

4. Marketing Strategy development:

• Preliminary marketing strategy is developed indicating plan for introducing the product in this stage. Market size, structure & behavior described.



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• It also outlines the planned price, distribution strategy, marketing budget and long term sales & profit goals, marketing mix strategy.

5. Business Analysis:

• In this stage the proposal’s business attractiveness is evaluated.

• Sales, cost and profit projections are prepared to determine whether they meet company objectives.

• If they do, then the product concept can move to the product development stage.



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6. Product development:

• The product concept moves to R&D or engineering to be developed into a product.

• The step involves a quantum jump in investment and may take weeks, months or even years to make a successful prototype.

• The prototypes are put to rigorous functional and customer tests.

• Alpha testing involves testing the prototype with in the firm to see if it performs in different applications. In Beta testing, a set of consumers are enlisted to use the product and asked to give their feedback.



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7. Market testing:

• It involves introducing the product into an authentic setting to learn:

How large is the market. How consumers and dealers react to handling, using & repurchasing the product.

• Test marketing is the most reliable method under market test. The new product with the support of chosen marketing mix is launched in a few select ‘test’ cities/territories.

• Care should be taken to monitor the marketing and to analyze and interpret the results.



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8. Commercialization:

• The firm takes the decision to go in for large scale manufacturing and marketing of product in this stage.

• The firm has to decide about when, where and how to market the new product.

Consumer adoption process:

• Adoption refers to an individuals decision to become a regular user of the product. Consumers pass through various stages before they adopt a new product or service (innovation).



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• Innovation diffusion process can be described as the spread of a new idea from its source of invention to its ultimate users.

• Adopters of new products pass through five stages:

1. Awareness: The consumer becomes aware of the product but lacks information.

2. Interest: The consumer is stimulated to seek more information about the innovation.

3. Evaluation: The consumer considers whether to try the innovation.

4. Trial: The consumer tries the innovation to improve his or her estimate of its value.

5. Adoption: The consumer decides to make full and regular use of the innovation. 23Prof. U.M. Amin, CMS,

JMI University, New Delhi04/11/23


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Adopter Classes:

• Consumers can be classified according to the time it takes for them to adopt a new product relative to other consumers.

• There are five major categories of consumers based on their adoption cycle time in relation to other adopters in their social system or market segment.

Innovators Early adopters Early majority Late majority Laggards


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The sequence and proportion of adopter categories


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• Innovators: They are young, venturesome, risk takers.• Early adopters: They take a calculated risk before

using innovative products. Typically they can be opinion leaders and provide information to groups.

• Early majority: They tend to be more cautious and use the products after the innovators and early adopters.

• Late majority: They are doubtful and sceptical about innovation of new products.

• Laggards: Laggards are more traditional and are past oriented.


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Recap:

• What challenges a company faces in developing new products.• What are the main stages in developing new products.• What is the best way to set up the new product development process.• What factors affect the rate of diffusion and consumer adoption of newly launched products.
