1. DEVELOPING NEW MARKET OFFERINGS
CHAPTER 11
DEVELOPING NEW MARKET OFFERINGS

2. IMPORTANT TOPICS OF THIS CHAPTER
What is a New Product?
Challenges in New Product Development (NPD)
Organizational Structure & NPD
Stages & Management of NPD
Diffusion & Adaption of New Products

3. NEW PRODUCTS New-to-the-World Products(10%)
New Product Lines/Functions/Applications (20%)
Additions to Existing Product Lines(26%)
Improvements and Revisions of Existing Products(26%)
Repositioning(7%)
Cost Reductions(11%)

4. CAUSES OF NEW PRODUCT FAILURE
Failure in Market Research Findings
Overestimated Demand and Size of Market
Design Failure
Positioning Problem
Ineffective Communication/Promotion
High Development Cost/ Price
Pressure from Competitors
Poor Timing

5. CAUSES OF NEW PRODUCT SUCCESS
Technological Superiority
Easy of Market Entry
Competitive Advantage
Size and Speed in Market growth
Identifying Needs/Wants and Good Timing
Effective Promotion/Communication
Uniqueness of the Concept/Product
Marketing and Managerial Synergy/Team Effort

6. CHALLENGES IN NEW PRODUCT DEVELOPMENT
Shortage in New Product Ideas
Fragmented Markets
Social and Governmental Constraints
High Development Cost
Shortage of Cash/Capital
Faster Development Time
Shorter Product Life Cycle

7. EFFECTIVE ORGANIZATIONAL ARRANGEMENTS
Top Management:
R&D Budget.
Organization for New-Product Development:
Product managers
New Product Managers
New Product Committee
New Product Departments:
R&D.
New Product Venture Team

8. THE NEW-PRODUCT DEVELOPMENT PROCESS
Idea Generation:
Sources of new ideas:
Customers’ needs and wants, scientists and engineers, competitors, sales force and channels, top management, universities and research firms.
Idea Screening:
Idea manager
Idea committee:
DROP-error
GO-error

9. THE NEW-PRODUCT DEVELOPMENT PROCESS
Concept Development and Testing:
Concept development:
Category concepts
Product-positioning map
Brand positioning map turns into brand concept
Concept testing
Virtual reality.
Customer-driven engineering:
Incorporating customer preferences into final engineering design.

10. Product & Brand Positioning
(a) Product-positioning
map
(breakfast market)
b) Brand-positioning
map
(instant breakfast market)
Expensive
Slow
Inexpensive
Quick
High price/oz.
Low in calories
Low price/oz.
High in calories
Brand C
Brand B
Brand A
Bacon
and
eggs
Pancakes
Instant
breakfast
Cold
cereal
Hot

11. THE NEW PRODUCT DEVELOPMENT PROCESS
Marketing Strategy Development:
Size of market, structure, behavior, market share and short-run profit goals
Pricing and distribution strategy
Long-run sales and profit goals.
Business Analysis:
Sales, cost and profit projections:
Estimating total sales:
First-time sales.
Replacement sales.
Repeat sales.
Estimating costs and profits:
Cost of goods sold, gross margin, gross contribution, net contribution, discounted contribution and pay back period, break-even analysis, risk analysis.

12. THE NEW PRODUCT DEVELOPMENT PROCESS
Physical version of the product:
Functional test (alpha testing)
Customer test (beta testing)
Measuring consumer preferences:
Rank-order.
Paired comparison.
Monadic rating.

13. THE NEW PRODUCT DEVELOPMENT PROCESS
Market Testing:
Consumer-goods market testing:
Trial, first repeat, adoption and purchase frequency:
sales-wave research-trying with no cost to consumer.
simulated test marketing.
controlled test marketing.
test markets- reliable forecasts, testing the marketing mix:
how many cities.
which cities.
length of test.
what information to learn.
what action to take-trial and repurchase rate.

14. Consumer-Goods Market Testing
Controlled
Test Market
A few stores that have
agreed to carry new
products for a fee.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
Sales-
Wave
Research
Test offering trail to
a sample of
consumers in
successive
periods.
Standard
Test Market
Full marketing campaign
in a small number of
representative cities.

15. THE NEW PRODUCT DEVELOPMENT PROCESS
Business goods market testing:
Alpha testing
Measure and improve product performance.
Beta testing:
Testing in customer’s site
Trade shows
Dealers’ showroom.
Commercialization:
Timing:
First entry.
Parallel entry.
Late entry.

16. NEW PRODUCT DEVELOPMENT PROCESS
Commercialization (cont.):
Geographical strategy:
Single locality
Regional
National
Global
Target-market prospects:
Users
Nonusers
Opinion leaders
Strategic model:
Critical path.

17. THE CONSUMER ADOPTION PROCESS
Early strategies:
Mass-market approach,
Heavy-user target market.
Early adopter theory:
Time laps between exposure and trials.
Influence to early adopter:
Media exposure.
Early adopter as opinion leader.
Stages in adoption:
Awareness.
Interest.
Evaluation.
Trial.
Adoption.

18. THE CONSUMER ADOPTION PROCESS (CONT.)
Factors influencing the adoption process:
People’s readiness:
Adopter Categories:
Innovator(2.5%)
Early Adopters(13.5%),
Early Majority (34%),
Late Majority(34%).
Laggards(16%).
Personal Influence:
More important at the evaluation stage, and on late adopters than the early adopters.

19. Time of adoption innovations
Adopter Categorization of the Basis of Relative Time of Adoption of Innovations
2 1/2%
Innovators
13 1/2%
Early
adopters
34%
Early
majority
34%
Late
majority
16%
Laggards
Time of adoption innovations

20. INFLUENCING FACTORS TO ADOPTION PROCESS
Characteristics of the Innovation affect rate:
Relative advantage
Compatibility
Complexity
Divisibility
Communicability
Organizations to Adopt Innovation:
Environmental factors
Organizational factors:
Progressiveness.
Size.
Pressure.