Ch 11

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© 2013 by Cengage Learning Inc. All Rights Reserved.1

Lamb, Hair, McDaniel

Chapter 11

Developing Developing and Managing and Managing

ProductsProducts

2013-2014

© 2013 by Cengage Learning Inc. All Rights Reserved. 2

Categories of New ProductsCategories of New Products

New-to-the-World

New Product Lines

Product Line Additions

Improvements or Revisions

Repositioned Products

Lower-Priced Products1

New to the World Innovations(aka Discontinuous Innovations)


New Product Lines


Product Line Additions


Improvements or Revisions


Repositioned Products


Lower Priced Products



New Product Success FactorsNew Product Success Factors

Long-term commitment

Company-specific approach

Capitalize on experience

Establish an environment

2


1. Each of the 7 stages acts as a screen.

2. It helps to filter out unworkable ideas

a plan that links the new-product development process with the objectives of the marketing

department, the business unit, and the corporation.


New-Product StrategyNew-Product Strategy

2

Idea Generation

• Customers: Internet chatter or blogs; customer innovation centers

• Employees: marketing, advertising and sales people are involved in marketplace. E.g. iPlace

• Distributors: closer proximity to end users e.g. Rubbermaid’s Sidekick

• Vendors: 7-Eleven forges partnerships e.g. Coca Cola Slurpee and Kwik-e-Mart

• Competitors: monitoring competitor’s success

• Research and Development: basic research, applied research, product development and product modification e.g. Nike Flyknit, Speedo Sharkskin

• Consultants: external perspective to evaluate brand or company’s internal capacities



Approaches for New Product Approaches for New Product DevelopmentDevelopment

Brainstorming

Focus Group

The process of getting a group to think of unlimited ways to vary a product or solve a problem.

The objective of focus group interviews is to stimulate insightful comments through group interaction.

2

Idea Screening

• Eliminates ideas that are inconsistent with the organizations’ new product strategy or are obviously inappropriate for some other reason.

• Concept test evaluates new product ideas, usually before any prototype has been created.

• Good for testing line extension but not new products that require major changes in consumer behaviour.


Business Analysis

• Preliminary figures for demand, cost, sales and profitability are calculated.

• The newness of the product, size of the market, nature of the competition all affect the accuracy of revenue projections

• Important to understand economic trends and impact on sales for product categories that are sensitive to fluctuations in the business cycle.

• Understanding of market potential to understand cost increases


Development

• Marketing strategy – product packaging, branding, labelling etc.

• A tedious and time consuming process• Crest Toothpaste, Polaroid, Gillette, Dupont

• Simultaneous Product Development• Shorten development process and reduce cost• Cross functional teams and global R&D• Threadless and RYZ – online voting competitions


Test Marketing

• Limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation

• Evaluate alternative strategies and to assess how well various aspects of the marketing mix fit together

• Identify cities where demographics and purchasing habits mirror the overall market

• Isolation of media from test markets to avoid attracting consumers outside the market

• Risks of costly failures and exposure to competitors

• Freebies and samples testing© 2013 by Cengage Learning Inc. All Rights Reserved. 17

Commercialization• The decision to market the product

• Success depends on good match between the product and market needs

• Successful new products deliver a meaningful and perceivable benefit to a sizable number of people or organizations

• Success stories depend on: 1. A history of listening carefully to customers2. An obsession with producing the best product possible3. A vision of what the market will be like in the future4. Strong leadership5. A commitment to new-product development6. A project-based team approach to new-product development7. Getting every aspect of the product development process right


Global Marketing QuestionsGlobal Marketing Questions

• Develop product for potential worldwide distribution

• Modify for unique market requirements (e.g. customization)

• Design products to meet regulations and key market requirements


3

The process by which the adoption of an innovation spreads.

DiffusionDiffusion


4

Laggards

Late Majority

Early Majority

Early Adopters

Innovators

Categories of AdoptersCategories of AdoptersCategories of Adopters


4

Trialability

Observability

Relative Advantage

Compatibility

Complexity

Product Characteristics and Product Characteristics and the Rate of Adoptionthe Rate of Adoption


4

Complexity

•The degree of difficulty involved in understanding and using a new product. The more complex the product, the slower is its diffusion.

Compatibility•The degree to which the new product is consistent with existing values and product knowledge, past experiences, and current needs. Incompatible products diffuse more slowly than compatible products.

Relative advantage

•The degree to which a product is perceived as superior to existing substitutes.

Observability

•The degree to which the benefits or other results of using the product can be observed by others and communicated to target customers. For instance, fashion items and automobiles are highly visible and more observable than personal care items.

Trialability

•The degree to which a product can be tried on a limited basis. It is much easier to try a new toothpaste or breakfast cereal than a new automobile or computer.

Direct fromMarketer

Word of Mouth

CommunicationAids the

Diffusion Process

Marketing Implications of the Marketing Implications of the Adoption ProcessAdoption Process


4


The Product Life Cycle

The purpose of PLC

• The PLC traces the stages of a product’s acceptance from introduction to decline

• Can be used to analyze a brand, a product form, or a product category

• Product categories have the longest lifecycle (e.g. all brands that satisfy a particular type of need)

• Grocery brands tend to have long PLCs


Introductory StageIntroductory Stage


High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits with slow sales increases Promotion focuses on awareness and

information Communication challenge is to stimulate primary

demand

5

Growth StageGrowth Stage


Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the

differences between brands Wider distribution

5

Maturity StageMaturity Stage


Sales increase at a decreasing rate Saturated markets Annual models appear Lengthened product lines Service and repair assume important roles Heavy promotions to consumers and

dealers Marginal competitors drop out Niche marketers emerge

5

Decline Stage


Long-run drop in sales Dependent on changes in taste or

speed of adoption of substitution products

Large inventories of unsold items

Elimination of all nonessential marketing expenses

“Organized abandonment”5

Conclusions on PLC

• The PLC can sometimes “REPEAT”– E.g. “classic” pieces– Nylon

• For hosiery• Wartimes for parachutes, mosquito netting, etc


Ch 11

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