MBA 671 S. Borna

M c consumer behavior Targetmarketing Mkgenvironment Strategy planning segmentation positioning Product The exchange object

Marketing Strategy Planning: Identification of Target Markets Developing Appropriate Marketing Mix For the Target Market(s).

Product Promotion place price Systems Approach to Policy Decisions

The Exchange Object M c Product

What do we mean by new products? Joseph Schumpeter envisioned innovation as being characterized by (1) construction of new plants; (2) introduction of new firms; (2) introduction of new firms; & (3) the rise to leadership of new man. man. From this point of view innovation in a discontinuous events.

An innovation is an idea perceived as new by the individual. Everett Rogers The operational definition: any form of a product that has recently become available in a market.

What is new product? from developers view: New- to-the world products New category entries, e.g. P & G first shampoo first shampoo Addition to product lines Liquid Tide Product improvements Repositioning,e.g., Arm and Hammer baking soda, as drain deodorant baking soda, as drain deodorant

1. Continuous innovations 2. Dynamically continuous innovations innovations 3. Discontinuous innovations Innovations may be classified as:

Continuous innovations: has the least disrupting influence on established consumption patterns.

Dynamically Continuous Innovation: has more disrupting effects than continuos innovation, although it still does not generally alter established patterns

Discontinuous Innovations involves the establishment of new behavior pattern.

Nature of Innovation No Cont.Innov. DynamicallyContinuousInnovations Change RadicalChange Discontinuousinnovations behavior pattern

Importance of new products P.L.C. P.L.C. Growth, Profitability Competition Competition

The new-product development dilemma High R & D costs High attrition rate of new product ideas High rate of market failure Shorter life spans of successful product cont.

Costliness of new product development process Social and government constraints. Fragmented Markets Dilemma: cont.

COST OF NEW PRODUCT FAILURES Product Estimated loss (mil) RCA’s Selectavision $ Ford’s Edsel Du Pont’s Corfam

Scott Paper Co. Baby S General Food’s Freeze Dried fruit cereals 5.0 Hunt’s pizza and hickory flavored catsup's 11.2 American Home’s easy-off Household cleaner.8

Stage No. of Cost per Total Ideas P. idea Cost Ideas P. idea Cost 1. Idea $64,000 Screening Screening 2. Concept 16 20,000 $320,000 Testing Testing 3. Product 8 200,000 $1,600,000 Development Development Costliness of New Product Development process Development process

4. Test 4 500,000 $2,000,000 Mkg. Mkg. 5. National 2 5,000,000 $10,000,000 Launch Launch Total $13,984,000 Total $13,984,000

New Product Development Alternatives 1. Co. laboratories a. Internal 2. independent research firms research firms b. External 1. acquisition 2. patents and 2. patents and licenses licenses 3. new product consultants

Initiating Factors Initiating Factors 1. Product life cycle 2. Technology 3. Changing consumer taste

New Product Development Process IdeaGenerationConceptDevelopment and Testing MarketingStrategyDevelopment IdeaScreening BusinessAnalysis ProductDevelopment MarketTesting Commercialization

Sources of new ideas Sources of new ideas customerstechnologycompetitionemployees executives co. scientists inventors others others customerstechnologycompetition executivesco.scientistsothers manager of idea process

Sources of new ideas Sources of new ideas customers, scientists, competitors Idea-generating devices attribute listing attribute listing brainstorming brainstorming morphological analysis morphological analysis (structural analysis) (structural analysis)

Screening new product ideas Criteria for Screening To avoid making two types of errors 1. Rejecting an idea that could become a very successful product 2. Accepting an idea that later fails

Concept Development and Testing New Product Idea New Product Concept New Product Image

According to Kotler: A product idea is a possible product that the company might offer to the market. A product concept is an elaborate version of the idea expressed in meaningful consumer terms. A product image is the consumers’ perception of product concept.

B.L.D. as an example Product Idea: a powder to be added to milk or water. Product Concept: Who will use the product: Teenagers, young or adult, middle-aged adults?

When it will be used? Breakfast, lunch, afternoon, dinner time, late evening? 1. concept one: an instant break- fast fast 2. concept two: a tasty snack drink for children for children 3. concept three: a health supplement for adults. supplement for adults.

Note: Note: Each of the above concepts Each of the above concepts represents a category concept represents a category concept i.e., each positions the idea within a category. It is the category concept, not the product concept that defines the product’s competition.

Business Analysis 1. Break-even analysis S = BE TFC P -VC UU NOTE: B.E. is not a forecasting method! $S2 S BE Q1Q2 Q FC TC P=(S -S )(P -VC ) a BE UU

Product Development 1. Building prototype models 2. Functional testing 3. The issue of product design *interaction between marketing and *interaction between marketing and development personnel development personnel *consumer preferences *consumer preferences *product features *product features *functional and consumer testing testing

Market Testing Product Use Tests Test Marketing

Market Testing Simulated store technique Controlled test marketing How many cities? Which cities? Length of test? What information? Testmarkets

Commercialization Main Questions: When (timing) first entry (first mover advantage) parallel entry late entry

Where? Where? (Geographical Strategy (Geographical Strategy Local, region, national international? To whom? (target market) (target market)

Diffusion of Innovations A Macro Process

Adoption process is a micro process AwarenessInteresttrialadoption

Diffusion of Innovations Four basic elements of diffusion process 1. Innovation 2. The Communication of innovation among individuals innovation among individuals 3. The social system 4. Time

The Social System: The time: the diffusion of new product adoption is a temporal phenomenon Diffusion as a process rather than an event.

Product characteristics affecting diffusion rate 1. Complexity: functional or attribute complexity functional or attribute complexity trade off complexity trade off complexity 2. Relative advantage 3. Observability 4. Perceived risk 5. Trialability 6. Compatibility

7. Type of group ( Young, affluent and highly educated accept change and highly educated accept change including new products). including new products). 8. Type of Decision ( Group vs individual decision) individual decision) 9. Fulfillment of a need

Diffusion Enhancement Strategies Strategies Diffusion Diffusion Diffusion Determinant Inhibitor Enhancement Strategies Strategies 1.Nature of Conservative Group Group Reach other markets; Target innovators within group

Diffusion Enhancement Strategies Strategies Diffusion Diffusion Diffusion Determinant Inhibitor Enhancement Strategies Strategies Type of Group Decision Choose media to reach all deciders; Provide conflict reduction themes

Diffusion Enhancement Strategies Strategies Diffusion Diffusion Diffusion Determinant Inhibitor Enhancement Strategies Strategies Marketing Limited Effort Use regional rollout; target innovators within group

Diffusion Enhancement Strategies Strategies Diffusion Diffusion Diffusion Determinant Inhibitor Enhancement Strategies Strategies Felt Need Weak Extensive Advertising Showing importance of benefits

Diffusion Enhancement Strategies Strategies Diffusion Diffusion Diffusion Determinant Inhibitor Enhancement Strategies Strategies Compatibility Conflict Stress Attributes Consistent with values and norms

Diffusion Enhancement Strategies Strategies Diffusion Diffusion Diffusion Determinant Inhibitor Enhancement Strategies Strategies Relative Low advantage Lower Price; Redesign Product

Diffusion Enhancement Strategies Strategies Diffusion Diffusion Diffusion Determinant Inhibitor Enhancement Strategies Strategies Observibility Low Use extensive advertising

Diffusion Enhancement Strategies Strategies Diffusion Diffusion Diffusion Determinant Inhibitor Enhancement Strategies Strategies Trialability Low Use free samples to early adopters special prices to rental agencies

Diffusion Enhancement Strategies Strategies Diffusion Diffusion Diffusion Determinant Inhibitor Enhancement Strategies Strategies Perceived risk High Success documentation endorsement by credible sources Guarantees

Adoption process is a micro process AwarenessInteresttrialadoption

Action Awareness Interest Adoption Trial cognition 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 Relative Time of Adoption of Innovations

ReviewReview ä Challenges in New Product Development (NPD) ä Organizational Structure & NPD ä Stages & Management of NPD ä Diffusion & Adaption of New Products