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Chapter 8
Group C
Nina Mols
Irma SefrintaMaartje Slot
Mai Ngan Ha
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Essence
Developing new products and services
Dimensions of a product
The core of products and benefits Role of product design
Innovation and evolution of markets
New products
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1 Understand the three objectivesin
managing new product development
(NPD).Product performance Refers to the extent to which a product meets its
customer-based performance specifications orhow well a product is rated in the eyes of thecustomer.
Speed to market
Is measured as the time which elapses betweenan unsatisfied need appearing in the market anda product being made available to a customer tosatisfy this need.
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1. Continue
Product cost
Refers to the total cost of delivering the
product to the customer. A product with a low
manufactured cost but a high marketing cost
may still be a failure.
In designing and developing new product all
three criteria must be fulfilled.
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2 Outline how the core benefit is
augmentedand developed into a
commercially viable product.Core benefit
First and central dimension
Involves the physical appearance of theproduct, its quality and its ability to satisfy
user needs including functional utility.
Allows customers to solve problems andsatisfy basic needs.
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2. Continue
Convert core benefit into generic or basic version.
Generic product concepts evolve with time.
Are easy to recognize. The names by which they
are known immediately convey a sense of
recognition for most people
A race horse
A bicycle
A cup
A hair cut
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2. Continue
Expected products
Generally reflects the minimum acceptablestandards in a particular product market.
Augmented product
Additional benefits and service that help to
distinguish the companys product from thoseof competitors and form the basis for productdifferentiation.
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2. Continue
Product differentiation allows the organization
to segment the marketone segment that
competes on the basis of augmented products
and another which competes on the basis of
the expected product.
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2. Continue
Product differentiation is related to the image
in the market of the organizations products
and its ability to charge a price premium.
Potential product
Refers to the evolutionary process throughwhich the product may pass.
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2. Continue
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Objective 3 Trace the role played by product design
in NPD, particularly in regard to product packaging
Product design means searching for a set of key
features or appeals that are special or even
unique to the product or customer group
It is considered as the designation of the key
benefits the product is to provide, the
psychological positioning of these benefits versus
competitive products, and the fulfillment of theproduct promises by physical features
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Product Design and Quality
Quality is what the customer thinks it is, anddesign contributes to it
Quality contributes to customer satisfactionbut the organization must also benefit fromproviding quality products and services
Next Slide : Example of integration betweendesign and quality in product development
Objective 3 continue . . .
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Objective 3 continue . . .
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Special position of packaging in product design
Prepackaging can make direct contact with
customers through the medium of the package,
creating images and appeals to stimulate purchase
Design image product = the organization attempts to
preserve that image for as long as possible to provide
assurance to customers that a consistent level of
quality is being delivered Packaging is not just in its protective role but as a
vehicle to carry information and as a way to promote
the product through the creation of a unique image
Objective 3 continue . . .
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Three factors contribute to image formation:
the outline design of the package
the use of strong color
the overall shape
Objective 3 continue . . .
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Promotional advantages which stem fromeffective design, shape and color = it helps toidentify products especially at point of purchase.
The advertising copy on the package lasts as long
as the product remains in the package. For some products the package is the only way to
differentiate the product contained.
In photocopying paper, for example, one brand isconsidered as good as another, so the packagemay be used to differentiate one supplier fromanother.
Objective 3 continue . . .
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Objective 4 Highlight the special nature of high
technology products
Rapidly change industry Focus should be on the customer benefits and
problem solving
Depend on how well the organization anticipates
future requirements that customers may not be ableto articulate in the present
Says Law (the supply of a product can create its owndemand) appears right on target
Example : Cell phone, before its introduction, it isunlikely that conventional consumer research studieswould have indicated a need or want for suchproducts.
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Objective 5 Describe the process of diffusion and
adoption of innovation at macro and micro level
Innovation = The adoption of a new idea, productor process which is prospectively useful
Diffusion is the process by which a new idea or
new product is accepted by the market Adoption is similar to diffusion except that it
deals with the psychological processes an
individual goes through, rather than an aggregatemarket process
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The greater the perceived complexity of the
innovation, the slower the rate of adoption
Providing the innovation in small quantities, if that ispossible, may reduce risk and encourage product
trial and adoption If the customer can observe the benefits of the
innovation, it is more likely to be adopted;
Product innovations that can be easily and frequently
communicated through the media are likely to beadopted much more rapidly than innovations whichrequire strong sales and extensive merchandisingsupport.
Objective 5 continue . . .
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Macro Level Diffusion
Generally follows a S-shaped pattern
relate the diffusion of an innovation to classifyadopters into categories according to when they first
try the product that consist of five stages
Objective 5 continue . . .
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Innovators are the first customers to adopt a new product.
Venturesome, willing to take risks; they may be outwardlooking, communicative, and sometimes thought of associally aggressive, and involved in many networks ofpeople.
Customers in this category form only a small proportion ofthe total population in the market
Objective 5 continue . . .
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Early adopters enjoy the prestige and respect thatearly purchasing of an innovation brings.
They tend to be opinion leaders, who influenceothers through word of mouth to purchase.
This group represents larger proportion of society
Objective 5 continue . . .
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The mass market for a product is divided into two customer groups.
Early majority customers are generally thought of as having status withintheir social class and are gregarious, communicative and attentive tosources of information.
Represent a large proportion of the total population.
Late majority customers, also a large part of the total population, tend tobe less cosmopolitan and responsive to change
Tend to be less well off, older and usually belong to one of the lowersocioeconomic groupings.
Objective 5 continue . . .
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The laggards may be a relatively substantial proportion of thepopulation
Tend to be price conscious, suspicious of novelty and change,have low incomes and are conservative in most of theirbehavior.
Most products have reached the maturity stage of the life cycle,
i.e. a saturated market, before being purchased by laggards.
Objective 5 continue . . .
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Micro Level Diffusion
Potential buyers are viewed as passing through anadoption process for the product or service that results in atrial and eventually may culminate in a purchase
It involves six stages
Objective 5 continue . . .
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awareof a product or brand when they learn of its
existence but do not have any further information the customer takes an interestin the product and is
motivated to seek information
evaluatethe product and the customer decides
whether to try it
Objective 5 continue . . .
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At the trialstage the customer purchases the product to
test it. Adoptionis said to have occurred when the customer uses
the product on a regular basis.
During the confirmationstage the buyer seeks
reinforcement of the adoption decision but may reverse itif for any reason a dissonance arises.
Objective 5 continue . . .
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Products are considered to be relatively easy toadopt if they:
are compatible with existing lifestyles
are relatively unimportant in total purchases
are suitable for mass advertising anddistribution
are consumed quickly
are easy to usecan be tried in small quantities
have desirable attributes which are obvious
Objective 5 continue . . .
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6 Outline the NPD processand specify the nature and
significanceof each of the stagesin the process.
Process of bringing new products to the
market can be very risky and often involves
large investments of money and time
Calculating cost: R&D, plant & equipment,
warehousing & distribution, packaging &
advertising development, launch &
promotional support
NPD process can be divided into six stages
Figure 8 7: Process of new product development
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Figure 8.7: Process of new product developmentNew product
development strategy
Commercial feasibilityTechnical feasibility Research and development
Market research
Commercialisation
IdeasgenerationrefinementScreening
Physical productdesign, packaging &
Performance
Business and markets plan
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6 Outline the NPD processand specify the nature and
significanceof each of the stagesin the process.
1. Idea generation and screening
Involves a continuous search for new product opportunities
Customers are the best source of new ideas, followed bycompetitors and the sales force
Refine the new concepts/ideas and screen them using criteria:
product features, market opportunities, competitive situation,organization capability, availability of finance
Further stages of refinement: Identity of market segment
Product description
Technical features
Customer benefits
Competitive advantage
Manufacturing process to be used
O f
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6 Outline the NPD processand specify the nature and
significanceof each of the stagesin the process.
2. Concept development and testing
Commercial feasibility study: judge if the new idea proposed iscommercially viable Financial projections
Market analysis
Sales projections
Estimates of profit margins
Likely costs
Technical feasibility study: determine if the appropriate technicalrequirements and standards can be met
Produce designs samples for quantitative research
Possibility of making mistakes: Not proceed with a new product development idea that is taken up
successfully by a competitor
Proceed with an idea which turns out to be a failure
6 O tli th NPD d if th t d
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6 Outline the NPD processand specify the nature and
significanceof each of the stagesin the process.
3. Business and marketing analysis
In order to produce a marketing plan
Financial and sales projections
Estimates of profit margins Development costs
Detailed description of target market
Positioning of new product
Likely market shares
Marketing mix specified
6 O tli th NPD d if th t d
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6 Outline the NPD processand specify the nature and
significanceof each of the stagesin the process.
4. Product market testing
Product is developed and tested
Functional tests, selected consumer tests are
administered Two main activities:
Deciding appropriate packaging requirements, design,test of performance
Product design, technical and production factorsinvolved in production planning and development ofsample product
6 O tli th NPD d if th t d
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6 Outline the NPD processand specify the nature and
significanceof each of the stagesin the process.
5. Physical product design, packaging &
performance
Product and the proposed mix of marketing
activities are introduced into authentic buyersettings to test product acceptance andmarket size
Quantitative research through consumersurveys and interviews
Revisions are possible at this stage
6 O tli th NPD d if th t d
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6 Outline the NPD processand specify the nature and
significanceof each of the stagesin the process.
6. Commercialization of a new product
Contract for manufacturers/build or rent manufacturing site
Launch the product in the market Timing
Geographic segments to be served
Target customer groups Introductory marketing strategy
4 criteria to evaluate new product development ideas Prospects for sales and profits
Capital or investment cost associated with the new venture
Competitive feasibility Strategic desirability
7 Dra attention to the danger of NPD
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7 Draw attention to the danger of NPD
myopia and avoid the various traps in newproduct development.
New product development myopia
Understanding customers needs is a costly
and inexact process
Even if customers know what they want,
transferring that information is difficult
Pressure for short-term returns and speed to
market has led to abandon efforts to exactly
understand what products customers want
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7. Draw attention to the danger of NPD myopia and avoid the various
traps in new product development.
Competitivedelusion
Marketing
analysis and
strategy
Marketscope
CapabilityIllusory
innovations
New product
development traps
7 Draw attention to the danger of NPD
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7 Draw attention to the danger of NPD
myopia and avoid the various traps in newproduct development.
Traps in new product development
1. Competitive delusion: companies believe
their approach is right and that they can
capture a large share of the market without
much opposition
adopt a roll-out sequence through a series of
smaller test markets first before going nationalor tackling large international markets
7 Draw attention to the danger of NPD
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7 Draw attention to the danger of NPD
myopia and avoid the various traps in newproduct development.
Traps in new product development
2. Market scope: organization adapts an overly
restricted market scope
design the product in such a way that without
heavy modifications, it can be subsequently
introduced into wider markets
7 Draw attention to the danger of NPD
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7 Draw attention to the danger of NPD
myopia and avoid the various traps in newproduct development.
Traps in new product development
3. Capability: weak companys competence in
the area and cost structure
do not attack market leaders, if the company
does not have a distinct competence in a
number of areas
(cost leadership, quality or access to distribution
outlets)
7 Draw attention to the danger of NPD
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7 Draw attention to the danger of NPD
myopia and avoid the various traps in newproduct development.
Traps in new product development
4.Illusory innovations: develop products based
on technology push which have no real points of
superiority
sufficient research and testing beforehand
7 Draw attention to the danger of NPD
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7 Draw attention to the danger of NPD
myopia and avoid the various traps in newproduct development.
Traps in new product development
5. Weak marketing analysis and incorrect
marketing strategy: inadequate market research
and sales projections are overly optimistic
sufficient research and testing beforehand
Whats new
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Whats new
Core benefit of the products: generic
product, expected product, augmentedproduct, potential product.
Role of product design; packaging in product
design
Position of high technology products
Process of new product development; traps
in new product development
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Applicable to the project
Product design and packaging: Even though
Aanenuitbesteden provide online service but
they still can pay attention to the design of
their website or the design of the brochure.
Applying new technology on product
innovation: improving the tendering database
*Since Aanenuitbesteden does not plan to develop new product, there arenot a lot for applicable
!
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Quiz!
1. What is one of the characteristics to define if
products are considered to be relatively easy
to adopt:
A. Compatible with existing lifestyles
B. Cheap
C. Totally unique in the market
D. Having a good brand image
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2. How many stages are there in the new product
development process:
A. More than 7B. 6
C. 5
D. 4
E. 3
F. 2
G. 1
1. New idea/Concept generation and screening
2. Development and testing of new idea/concept
3. Business and marketing analysis4. Product development and testing
5. Test marketing
6. Commercialization
d l d
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3. In order to evaluate new product
development ideas, how many important
criteria are there (as mentioned in the book) ?A. 3
B. 5
C. 2D. 4
1. Prospects for sales and profits
2. Capital or investment cost associated with the
new venture
3. Competitive feasibility
4. Strategic desirability
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4. Competitive delusion, Market Scope,
Capability, Marketing Analysis and Strategy,
Illusory innovation are the traps in new productdevelopment
True or False