1. MARKETING MANAGEMENT 12 th edition 20 Introducing New Market Offerings KotlerKeller

2. 20-2 Chapter 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? ►What is the best way to set up the new-product development process? ►What factors affect the rate of diffusion and consumer adoption of newly launched products?

3. 20-3 Categories of New Products Six categories of new products 1.New-to-the-world products (new products that create new markets) 2.New product lines (new products that enable entry to established markets) 3.Additions to existing product lines (new products that supplement established product lines: package sizes, flavors, etc) 4.Improvements and revisions of existing products (new products that improve performance & increase perceived value - likely replaces predecessor) 5.Repositioning (existing products targeted to new markets) 6.Cost reductions (new products providing similar performance at lower costs) What do we mean by Using the Term “New Product(s)? Booz, Allen and Hamilton categorize as:  Most common reference today = Products using new technologies and/or new features  All require varying magnitudes of investment  Many companies build innovation into corporate business philosophy  A lack of ongoing innovation creates an increase in risk

4. 20-4 New Product Development ♦Shortage of ideas ♦Fragmented markets ♦Social and governmental constraints ♦Cost of development ♦Capital shortages ♦Faster required development time ♦Shorter product life cycles FACTORS THAT HINDER NEW PRODUCT DEVELOPMENT FACTORS THAT HINDER NEW PRODUCT DEVELOPMENT

5. 20-5 Interacting w/ Others >Customers >Sales representatives > Product champion > Intermediaries Techniques for stimulating creativity in individuals and groups >Attribute listing >Forced relations >Morphological analysis >Reverse assumption analysis >New contexts >Mind-mapping >Idea manager >Idea committee >Two types of errors in screening ideas Drop-error Go-error Concept Development >Product idea >Product concept >Category concept >Product – positioning map >Brand concept Concept Testing >Rapid prototyping >Virtual reality >Customer-driven engineering >Questions to measure product dimensions (see text p.361) Conjoint Analysis >Target market size, structure and behavior; planned product positioning; sales, market share, and profit goals-first few years >Planned price, dis- tribution strategy, and marketing budget-first year >Long run sales, profit goals and marketing mix strategy over time >Estimating total sales (survival age distribution >Estimating costs and Profits (break- even analysis, risk analysis) >Quality Function Deployment (QFD) >Customer attributes (CAs) >Engineering attributes (EAs) >Customer tests >Alpha testing >Beta testing >Consumer pre- ference measures (Rank-order, Paired- compar- ison, Monadic- rating) Consumer-Goods Market Testing >Seeks to estimate four variables (trial, first repeat, adoption, pur- chase frequency) >Sale wave research >Simulated Test Marketing >Controlled Test Marketing >Test Markets ( How many test cities?, Which cities? Length of test? What inform- ation? What action?) Business Goods Market Testing > When (Timing- first entry, parallel entry, late entry) >Where (Geographic Strategy) >To Whom (Target -Market Prospects) >How (Introductory Market Strategy) (Critical path scheduling (CPS) PRODUCT APPROVAL CRITERIA: Minimum Market Potential, Growth Rate, ROI, Time to Market, ETC. *Product managers *New-product managers *High-level management committee *New product department *Venture teams HOLD OR RECYCLE The New Product-Development Decision Process

6. 20-6 Consumer-Adoption Process Adoption Adoption is an individual’s decision to become a regular user of a product. * New product marketers aim at consumers who are early adopters. * Early adopters are consumers who react quickest to the innovation diffusion process. * Innovation: any offering perceived as new. * Innovation Diffusion Process : spreading of a new idea from its source to is adopters. Adoption Process Adoption Process is the mental process through which one passes from initial exposure to final adoption. ♦ Awareness: awareness without information ♦ Interest : stimulation to seek information ♦ Evaluation: consideration to try an innovation ♦ Trail : initial use of an innovation to estimate value ♦ Adoption : decision to use innovation on regular basis

7. 20-7 Three Factors That Affect the Adoption Process DIFFERENCES IN INDIVDUAL READINESS TO TRY A PRODUCT Innovators: venturesome technology enthusiasts who tinker with new products Early Adopters: Opinion leaders who seek out new products for competitive edge Early Majority: Deliberate pragmatists who adopt innovation when benefits have been proven Late Majority: Risk averse, skeptical conservatives – price sensitive & technology shy Laggards: Tradition bound until status quo is no longer defensible CHARACTERISTICS OF THE INNOVATION THE INNOVATION Relative Advantage: degree to which innovation appears superior to existing products Compatibility: degree top which the innovation matches the values and experiences of the individual Complexity: degree to which the innovation is relatively difficult to understand or use Divisibility: degree to which the innovation can be tried on a limited basis Communicability: degree to which the beneficial results are cummunicable to others Other Characteristics : cost, risk, uncertainty, scientific credibility and social approval AN ORGANIZATION’S AN ORGANIZATION’S READINESS TO READINESS TO ADOPT INNOVATION ADOPT INNOVATION Innovators need to identify groups, organizations, potential customers who are innovative buyers Innovators need to know how the environment surrounding the organization (community progressiveness, Income, etc.) and the organization itself (profits, size, etc.) affects the adoption process Marketing strategies of new products are therefore structured to influence the adoption process through knowledge of those factors that influence it.