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Marketing ManagementMarketing Management2nd Edition2nd Edition

Chapter 9:Chapter 9:

New ProductsNew Products

Michael R. Czinkota and Masaaki Kotabe

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Chapter OutlineChapter Outline

Gap AnalysisGap Analysis Types of New ProductsTypes of New Products Product ModificationProduct Modification Corporate Factors to New Product CreationCorporate Factors to New Product Creation Marketing Factors to New Product CreationMarketing Factors to New Product Creation Product Development ProcessProduct Development Process Strategic ScreeningStrategic Screening Test MarketingTest Marketing Product LaunchProduct Launch

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Gap AnalysisGap Analysis

Usage Gap (UG)Usage Gap (UG)

Distribution Gap (DG)Distribution Gap (DG)

Product Gap (PG)Product Gap (PG)

Competitive Gap (CG)Competitive Gap (CG)

Existing Sales (ES)Existing Sales (ES)

Existing(market)usage(EU)

Marketpotential

(MP)

MP = UG + EU

EU = DG+PG+CG+ES

Real market share =ES----EU

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Gap Analysis: Usage GapGap Analysis: Usage Gap

Gap between the Gap between the total potential for total potential for the market and the the market and the actual current actual current usage by usage by customers.customers.

Market potential Market potential gapgap

Existing usage gapExisting usage gap

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Gap Analysis: Distribution GapGap Analysis: Distribution Gap

Sales potential in Sales potential in geographic geographic regions or regions or distribution distribution channels where channels where product is not product is not currently currently distributed.distributed.

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Gap Analysis: Product GapGap Analysis: Product Gap

Firm does not Firm does not have product have product offerings in offerings in certain certain segments.segments.

X

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Gap Analysis: Competitive GapGap Analysis: Competitive Gap

Differences in the Differences in the effectiveness of effectiveness of a firm’s a firm’s marketing marketing strategy relative strategy relative to its to its competitors.competitors.

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Broader Objectives of Gap AnalysisBroader Objectives of Gap Analysis

Five strategy scenarios:Five strategy scenarios: Technologically driven strategy (26%)Technologically driven strategy (26%) Balanced, focused strategy (16%)Balanced, focused strategy (16%) Technologically deficient strategy (16%)Technologically deficient strategy (16%) Low budget, conservative strategy (24%)Low budget, conservative strategy (24%) High budget, diverse strategy (19%)High budget, diverse strategy (19%)

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Types of “New” ProductsTypes of “New” Products

Cost Reduction

11%

Additions to Existing Lines

26%

Improvementto Existing

Products26%

New Product Lines20%

Reposition7%

New to the World10%

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Product ModificationProduct Modification

Feature ModificationFeature ModificationQuality ModificationQuality Modification

Style ModificationStyle Modification Image ModificationImage Modification

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Corporate Factors to Corporate Factors to New Product CreationNew Product Creation

Production capabilitiesProduction capabilities Financial performanceFinancial performance Investment potentialInvestment potential Human factorsHuman factors Materials supplyMaterials supply CannibalismCannibalism TimeTime

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Marketing Factors to Marketing Factors to New Product CreationNew Product Creation

Match with existing rangesMatch with existing ranges Price and qualityPrice and quality Distribution patternsDistribution patterns SeasonalitySeasonality

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Product Development ProcessProduct Development Process

Strategic screeningStrategic screeningStrategic screeningStrategic screening

Concept testingConcept testingConcept testingConcept testing

Product developmentProduct developmentProduct developmentProduct development

Product testingProduct testingProduct testingProduct testing

Test marketingTest marketingTest marketingTest marketing

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Strategic ScreeningStrategic Screening

Qualitative Qualitative screeningscreening

Financial analysisFinancial analysis Sensitivity analysisSensitivity analysis Break-even Break-even

analysisanalysis Marginal costingMarginal costing

IdeasIdeasIdeas

Ideas

Idea

sId

eas

IdeasIdeas Ideas

Ideas

Product ideaProduct idea

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Test Marketing:Test Marketing:AreasAreas

Television viewing Television viewing areaarea

Test cityTest city Residential Residential

neighborhoodsneighborhoods Test sitesTest sites Lead countriesLead countries

*Dallas

*Seattle

*Chicago*Los Angeles

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Test Marketing:Test Marketing:DecisionsDecisions

Which testmarket?Which test

market?

What willbe tested?

How longa test?

What successcriteria?

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Product LaunchProduct Launch

Product replacementProduct replacement Risk vs. timeRisk vs. time Japanese-style product developmentJapanese-style product development