1. Developing New Market Offerings
Who should ultimately design the product? The customer, of course.

2. Meeting Objectives
In this meeting, we focus on the following questions:
What are customer value, satisfaction, and loyalty, and how can companies deliver them?
What is the lifetime value of customers?
How can companies both attract and retain customers?
What is database marketing?

3. Meeting Objectives
What challenges does a company face in developing new products?
What organizational structures are used to manage new-product development?
What are the main stages in developing new products, and how can they be managed better?
What factors affect the rate of diffusion and consumer adoption of newly launched products?

4. Loyalty The Value Proposition
A deeply held commitment to re-buy or re-patronize
a preferred product or service in the future despite
situational influences and marketing efforts having
the potential to cause switching behavior.
The Value Proposition
The whole cluster of benefits the company promises
to deliver

5. Measuring Satisfaction
Periodic surveys
Customer loss rate
Mystery shoppers
Monitor competitive performance

6. Product and Service Quality
Quality is the totality of features and characteristics
of a product or service that bear on its ability
to satisfy stated or implied needs.
Quality
Conformance
Performance

7. Total Quality Management
TQM is an organization-wide
approach to continuously
improving the quality of
all the organization’s processes,
products, and services.

8. Maximizing Customer Lifetime Value
Customer profitability
Customer equity
Lifetime value
Estimating Lifetime Value
Annual customer revenue: $500
Average number of loyal years: 20
Company profit margin: 10
Customer lifetime value: $1000

9. Drivers of Customer Equity
Value equity
Brand equity
Relationship equity
Framework for CRM
Identify prospects and customers
Differentiate customers by needs and value to company
Interact to improve knowledge
Customize for each customer

10. CRM Strategies Reduce rate of defection Increase longevity
Enhance share of wallet
Terminate low-profit customers
Focus more effort on high-profit customers

11. Mass vs. One-to-One Marketing
Average customer
Customer anonymity
Standard product
Mass production
Mass distribution
Mass advertising
One-way message
Economies of scale
One-to-One
Individual customer
Customer profile
Customized market offering
Customized production
Economies of scope
Share of customer

12. Customer Retention
Acquisition of new customers can cost 5 times more than retaining current customers.
The average customer loses 10% of its customers each year.
A 5% reduction to the customer defection rate can increase profits by 25% to 85%.
The customer profit rate increases over the life of a retained customer.

13. Describing Market Dynamics
Permanent capture markets
Simple retention markets
Customer migration markets
Building Loyalty
Proactive
Partnership
Basic
Reactive
Accountable

14. Reducing Customer Defection
Define and measure retention rate
Distinguish causes of customer attrition
Estimate profit loss associated with loss of customers
Assess cost to reduce defection rate
Gather customer feedback
Forming Strong Customer Bonds
Add financial benefits
Add social benefits
Add structural ties

15. Database Key Concepts Using the Database
Customer database
Database marketing
Mailing list
Business database
Data warehouse
Data mining
Using the Database
To identify prospects
To target offers
To deepen loyalty
To reactivate customers
To avoid mistakes

16. Developing New Market Offerings
Six categories of new products
New-to-the-world products
New product lines
Additions to existing product lines
Improvements and revisions of existing products
Repositioning
Cost reductions

17. Challenges in New-Product Development
Incremental innovation
Disruptive technologies
Why do new products fail?
A high-level executive pushes a favorite idea through in spite of negative research findings.
The idea is good, but the market size is overestimated.
The product is not well designed.

18. Challenges in New-Product Development
The product is incorrectly positioned in the market, not advertised effectively, or overpriced.
The product fails to gain sufficient distribution coverage or support.
Development costs are higher than expected.
Competitors fight back harder than expected.

19. Challenges in New-Product Development
Factors that tend to hinder new-product development
Shortage of important ideas in certain areas
Fragmented markets
Social and governmental constraints
Cost of development
Capital shortages
Faster required development time
Shorter product life cycles

20. Organizational Arrangements
New-product deployment requires specific criteria – one company established the following acceptance criteria
The product can be introduced within five years
The product has a market potential of at least $50 million and a 15 percent growth rate.
The product would provide at least 30 percent return on sales and 40 percent on investment.
The product would achieve technical or market leadership.

21. Organizational Arrangements
Budgeting For New Product Development
3M’s approach:
15% rule
Each promising idea gets an “executive champion”
Expect some failures
Golden Step awards handed out each year

22. Organizational Arrangements
Organizing New-Product Development
Product managers
New-product managers
High-level management committee
New product department
Venture teams
Stage-gate system
Gatekeepers make one of four decisions: Go
Kill
Hold
Recycle

23. Steps in New Product Development
Idea Generation
Idea Screening
Steps in New Product Development
Concept Develop & Test
Marketing Strategy
Product Development
Market Testing
Commercialization

24. Idea Generation Interacting with Others
Sales representatives
Intermediaries
Product champion
Techniques for stimulating creativity in individuals and groups
Attribute listing
Forced relationships
Morphological analysis
Reverse assumption analysis
New contexts
Mind-mapping

25. Idea Screening Idea manager Idea committee
Two types of errors in screening ideas
DROP-error
GO-error

26. Product-Idea Rating Device
Relative Weight
Product Score
Product Rating
Product Success Requirements
(a)
(b)
(c = a x b)
Unique or superior product
.40 .8
.32
High performance to cost ratio
.30 .6
.18
High marketing dollar support
.20 .7
.14
Lack of strong competition
.10 .5
.05
Total
1.00
.69
 Rating scale: poor; fair; good. Minimum acceptance rate: .61

27. Concept Development and Testing
Product idea
Product concept
Concept development
Category concept
Product–positioning map
Brand concept
Concept Testing
Rapid prototyping
Virtual reality
Customer-driven engineering

28. Concept Development and Testing
Questions to measure product dimensions
Communicability and believability
Need level
Gap level
Need-gap score
Perceived value
Purchase intention
User targets, purchase
occasions, purchasing
frequency
Conjoint Analysis
Example: five design elements
Three package designs
Three brand names
Three prices
Possible Good Housekeeping seal
Possible money-back guarantee

29. Marketing Strategy Target market’s size, structure, and behavior
Planned price, distribution, and promotion for Year 1
Long-run sales and profit goals and marketing-mix strategy over time
Business Analysis
Estimating Total Sales
Survival-age distribution
Estimating Cost and Profits
Break-even analysis
Risk analysis

30. Product Development Quality Function Deployment (QFD)
Customer attributes (CAs)
Engineering attributes (EAs)
Customer tests
Alpha testing
Beta testing
Consumer preference measures:
Rank-order
Paired-comparison
Monadic-rating

31. Market Testing Consumer-Goods Market Testing
Seeks to estimate four variables
Trial
First repeat
Adoption
Purchase frequency
Sales wave research
Simulated Test Marketing
Controlled Test Marketing
Test Markets
How many test cities?
Which cities?
Length of test?
What information?
What action to take?
Business-Goods Market Testing

32. Commercialization When (Timing) Where (Geographic Strategy)
First entry
Parallel entry
Late entry
Where (Geographic Strategy)
To Whom (Target-Market Prospects)
How (Introductory Market Strategy)
Critical path scheduling (CPS)

33. The Consumer-Adoption Process
Consumer-loyalty process
Mass-market approach
Heavy-usage target marketing
Stages in the Adoption Process
Innovation
Innovation diffusion process

34. The Consumer-Adoption Process
Adopters of new products move through five stages
Awareness
Interest
Evaluation
Trial
Adoption
Factors Influencing the Adoption Process
Readiness to Try New Products and Personal Influence

35. Adopter Categorization on the Basis of Relative Time of Adoption of Innovation

36. The Consumer-Adoption Process
Personal influence
Characteristics of the Innovation
Relative advantage
Compatibility
Complexity
Divisibility
Communicability
Organizations’ Readiness to Adopt Innovations