New Product Development Process

Transcription

1 New Product Development Process New product development process: six stages through which new product ideas progress before being introduced to the overall market

2 Idea Generation New product ideas come from many sources including: Sales force, Customers, Employees, R&D specialists, The competition, Suppliers, Retailers, Independent inventors Screening Screening separates ideas with commercial potential from those that cannot meet company objectives Checklists of development standards can be helpful at this stage

3 Business Analysis The business analysis consists of assessing the new product s market potential, growth rate, likely competitive strengths, and compatibility of the proposed product with organizational resources Concept testing Development Converting an idea into a physical product Requires interaction among many of the firm s departments Prototypes may go through many changes

4 Test Marketing Test marketing: Introduction of a trial version of a new product supported by a complete marketing campaign to a selected city of television coverage area Some firms skip this stage, moving directly to fullscale commercialization Commercialization In this stage, the firm establishes marketing strategies, and funds outlays for production and marketing The sales force, marketing intermediaries and potential customers are acquainted with the new product

5 Product Safety and Liability Product Liability: responsibility of manufacturers and marketers for injuries and damages caused by their products

6 The New Product Development Process A new product is best developed through a series of six stages: The first two stages provide a focus for generating new-product ideas and a basis for evaluating them. The next three stages deal with ideas and are the least expensive. In their haste, some companies skip stages the most common omission being market tests.

7 Criteria for New Products there must be adequate market demand: this is necessary but not sufficient for success must satisfy key financial criteria must be compatible with environmental standards must fit with the company s marketing structure should also be compatible with production capabilities, satisfy legal requirements, and fit with corporate goals and objectives

8 New Product Planning As a firm s offerings enter the maturity and decline stages of the product life cycle, it must add new items to continue to prosper Alternative Product Development Strategies

9 Product Development Strategies Product positioning: consumers perceptions of a product s attributes, uses, quality, and advantages and disadvantages in relation to those of competing brands Cannibalization: a loss of sales of the current product due to competition from a new product in the same line

10 The Consumer Adoption Process Adoption process: Stages that consumers go through in learning about a new product, trying it, and deciding whether to purchase it again. Awareness Interest Evaluation Trial Adoption or rejection

11 Consumer innovator: People who purchase new products almost as soon as the products reach the market Diffusion process: Process by which new goods or services are accepted in the marketplace

12 Categories of Adopters Based on Relative Times of Adoption

13 Identifying Early Adopters Substantial benefits may be obtained by locating the likely first buyers of new products (innovators and early adopters) Suggestions for modifying the product may be obtained from these individuals Acceptance or rejection of the innovation by innovators and early adopters can help forecast sales

14 Rate of Adoption Determinants Characteristics of a product innovation that influence its adoption rate include: Relative advantage Compatibility Complexity Possibility of trial use Observability

15 Organizing for New Product Development New-Product Committees New-Product Departments Product Managers Venture Teams Task forces

16 Development of New Product Strategy Company Goals Defend market share Strengthen reputation as an innovator Product Strategy Introduce addition to existing produce line/ revise existing product Introduce a really new product - not just an extension of an existing product Examples Pizza Hut s Big New Yorker and Stuffed Crust pies Digital cameras introduced by Sony, Canon, and other firms

17 Adoption Process Awareness Interest Evaluation Trial Adoption

18 Adoption Process Product Adopter Categories 100% of eventual adopters

19 Adoption Process Product Adopter Categories 2.5% Innovators

20 Adoption Process Product Adopter Categories 2.5% Innovators 13.5% Early Adopters

21 Adoption Process Product Adopter Categories 2.5% Innovators 13.5% Early Adopters 34% Early Majority

22 Adoption Process Product Adopter Categories 2.5% Innovators 13.5% Early Adopters 34% Late Majority 34% Early Majority

23 Adoption Process Product Adopter Categories 16% Laggards 2.5% Innovators 13.5% Early Adopters 34% Late Majority 34% Early Majority

24 Product Life Cycle Introductory Stage Growth Stage Maturity Stage Decline Stage Sales Dollars Profits 0 Time

25 Introductory Stage High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits Promotion focuses on awareness and information Intensive personal selling to channels Full-Scale Launch of New Products

26 Growth stage Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Promotion emphasizes brand ads Goal is wider distribution Prices normally fall Development costs are recovered Offered in more sizes, flavors, options

27 Maturity Stage Declining sales growth Saturated markets Extending product line Stylistic product changes Heavy promotions to dealers and consumers Marginal competitors drop out Prices and profits fall Niche marketers emerge Many consumer products are in Maturity Stage

28 Decline Stage Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses Rate of decline depends on change in tastes or adoption of substitute products

29 How stages of the product life cycle relate to firm s marketing objectives & marketing mix actions INTRODUCTION GROWTH MATURITY DECLINE Product Strategy Limited models Frequent changes More models Frequent changes. Large number of models. Eliminate unprofitable models Distribution Strategy Limited Wholesale/ retail distributors Expanded dealers. Longterm relations Extensive. Margins drop. Shelf space Phase out unprofitable outlets Promotion Strategy Awareness. Stimulate demand.sampling Aggressive ads. Stimulate demand Advertise. Promote heavily Phase out promotion Pricing Strategy Higher/recoup development costs Fall as result of competition & efficient production. Prices fall (usually). Prices stabilize at low level.

30 MANAGING THE PRODUCT LIFE CYCLE Modifying the Product Alter product quality Enhance performance Change appearance Modifying the Market Finding New Users Increase use Create new use situations

31 EXTENDING THE PRODUCT LIFE CYCLE- Repositioning Reacting to a Competitor s Position-never compete head on Catching a Rising Trend-baby aspirin is now low dose aspirin to reduce heart attacks Changing the Value Offered Trading Up-add bells & whistles to raise price Trading Down- remove bells & whistles to lower price Downsizing-reduce contents but maintain price

32 FIGURE 11-3 Alternative product life cycles Why the different shapes?

33 Percentage of Adopters Five categories of product adopters Early Majority 34% Late Majority 34% Early Adopters 13.5% Innovators 2.5% Laggards 16% Time

34 Ansoff Matrix

35 Background Long-term business strategy is dependant on planning for their introduction Ansoff Matrix represents the different options open to a marketing manager when considering new opportunities for sales growth

36 Variables in the matrix Two variables in Strategic marketing Decisions: The market in which the firm was going to operate The product intended for sale In terms of the market, managers had two options: Remain in the existing market Enter new ones

37 In terms of the product, the two options are: selling existing products developing new ones

38 Existing PRODUCTS New Existing MARKET PENETRATION INCREASING RISK PRODUCT DEVELOPMENT MARKETS Sell more in existing Markets MARKET EXTENSION Sell new products in existing markets DIVERSIFICATION INCREASING RISK New Achieve higher sales/market share of existing products in new markets Sell new products in new markets

39 Existing PRODUCTS New Existing MARKET PENETRATION INCREASING RISK MARKETS Sell more in existing Markets INCREASING RISK New

40 MARKET PENETRATION This is the objective of higher market share in existing markets E.g. in 2000, Mitsubishi announced a 10% reduction in prices in the UK in order to encourage purchases

41 Existing PRODUCTS New Existing MARKET PENETRATION INCREASING RISK MARKETS Sell more in existing Markets MARKET EXTENSION INCREASING RISK New Achieve higher sales/market share of existing products in new markets

42 MARKET EXTENSION This is the strategy of selling an existing product to new markets. This could involve selling to an overseas market, or a new market segment Nintendo are making hand held games consoles (e.g. DS) appeal to the adult market by introducing games such as Brain Train

43 Existing PRODUCTS New Existing MARKET PENETRATION INCREASING RISK PRODUCT DEVELOPMENT MARKETS Sell more in existing Markets MARKET EXTENSION Sell new products in existing markets INCREASING RISK New Achieve higher sales/market share of existing products in new markets

44 PRODUCT DEVELOPMENT Least risky of all four strategies This involves taking an existing product and developing it in existing markets E.g. Coca-Cola. This has been developed to have vanilla, lime, cherry and diet varieties (amongst others) in the SOFT DRINKS market

45 Existing PRODUCTS New Existing MARKET PENETRATION INCREASING RISK PRODUCT DEVELOPMENT MARKETS Sell more in existing Markets MARKET EXTENSION Sell new products in existing markets DIVERSIFICATION INCREASING RISK New Achieve higher sales/market share of existing products in new markets Sell new products in new markets

46 DIVERSIFICATION This is the process of selling different, unrelated goods or services in unrelated markets This is the most risky of all four strategies E.g. the Tata group

47 Summary Risks involved differ substantially The matrix identifies different strategic areas in which a business COULD expand Managers need to then asses the costs, potential gains and risks associated with the other options

48 The Boston Consulting Group (BCG) Matrix 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

49 SBU It is a company within a company The business is differentiated from the rest of the company It has its own set of competitors It is a separate profit centre

50 The BCG Matrix??? Stars Dogs Cash Cows Mkt Share

51 BCG Matrix-HUL Hair Care Skin Care Premium Soaps & Laundry Deodorants Water (PureIt) Processed foods Colour Cosmetics Mass Soaps Beverages Oral care Laundry Sea-food exports

52 Consumer Behavior - II

53 The Buyer Decision Process Need Recognition Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behavior

54 B2B Defined The management process responsible for the facilitation of exchange between producers of goods and services and their organisational customers. B2B marketing and purchasing is a complex and risky business involving a number of different parties.

55 Flows within a B2B market

56 B2B customers Commercial enterprises - profit making organisations that produce and/or resell goods and services for a profit. Can be subdivided into users, original equipment manufacturers (OEMs), resellers. Government bodies. Institutions - largely non-profit making organisations, e.g. universities, churches, etc.

57 Characteristics of B2B markets Nature of demand - derived, joint, inelastic. Structure of demand - industrial and geographic concentration. Buying process complexity. Buyer-seller relationships.

58 Influences on a B2B purchasing chain

59 Roles in the buying process Purchasing - handle relationships with suppliers. Production/operations - meeting targets for the end product in both quantity and quality terms. Engineering - the specification and design. R&D. Finance - devolve budgets to appropriate managers. Marketing - outputs of the production process.

60 Consumer vs. Organizational buying behavior Decisions made by consumers are quite simple Organizational buying processes are more complicated, there are several phases and steps Different buying behavior for different products and target groups Simple consumer goods like food and beverages are bought very spontaneously influenced by advertising and product presentation For premium consumer goods (expensive clothes, computers) buying behavior is getting more rational comparison Private investment goods price bargaining 60

61 B2B products organizational procurement starts More than one person involved Buying process follows certain rules Price comparison, standardisation, tenders, qoutations etc)

62 B2B systems involve more capabilities and greater workloads From the buyer s and the supplier s side decision has more extensive consequences

63 B2B facilities Industrial plants Manufacturing installations Office buildings

64 Main types of buying situations in B2B Straigtht rebuy routine decision, repetitive process (energy, office supplies, raw materials, wood), component suppliers for the automotive industry little or no new information Modified rebuy more complicated but less sophisticated: cars, trucks, computers, consulting modified rebuys are often treated too uncautious New task calls for thorough research industrial plant highest level of uncertainty. Strategic new tasks are of extreme strategic and financial importance (aircrafts, military equipment, infrastructure) reevaluation of alternatives and search for new information and new alternatives

65 Buying phases Problem recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order routine specification Performance review

66 Stages of decision in B2B procurement Backhaus developed a widely usable model to distinguish between 5 phases of procurement Preliminary application (initiation phase) Tender proposal Negotiation Processing of order Warranty and services

67 Preliminary application Recognition of a problem (need) and a general solution Released by top management = operating department or external consultants Result request for an offer addressed to a number of potential suppliers

68 Tender preparation phase Determination of characteristics and quantity of needed items Search for and qualification of potential sources Supplier has to provide an offer Tries to be incomparable with his competitors Customer tries to make the offer best comparable

69 Negotiation phase = core selling process Comprises acquisition and analysis of proposals, evaluation of proposals and selection of suppliers

70 Processing phase/warranty/ service phase Contains selection of an order routine Realisation of the transaction along with the fixation of after sales service tasks

71 Roles in B2B procurement buying center concept Group of people involved in the buying process buying center This causes problem in identifying and targeting the right people within the decision process

72 Buying center Role keepers have different tasks not mandatory Buyer User Initiator Gatekeeper Influencer

73 Buyer Formal authority to sign contracts Member of purchasing department Influences the vendor selection Not in technical details Main criteria: price + terms and conditions of the contract

74 User Person working with the product Interested in benefits and unobstructed function of the product to buy Large knowhow and preconceived opinion

75 Influencer A person with high technical knowledge and practical experience definition of minimum requirements on technical or company standards

76 Gatekeeper Controls the flow of information within the buying center Assistant of decision maker Influence by preparing the decision and the relevant documents

77 Decider Right to say yes or no Mightiest person

78 Initiator Person who brings new ideas and solutions into the company

79 Specific marketing considerations in the industrial facilities business Long decision taking process High risk Complex buying center The specific competitive situation

80 Product policy Focuses on innovation Has to care for high flexibility in research and development And manufacturing and assembling

81 Price Strict bid and tender rules High transparency Add value with service offering to achieve a differentiating position Another aspect: financing and sourcing models

82 Distribution policy Focus on negotiation phase Provide excellent people in the selling center High technical knowledge

83 Communication Problem solver! Proving success with comparable tasks Reference projects!

84 Customer Relationship Management (CRM)

85 What is CRM? CRM is a business strategy that aims to understand, anticipate and manage the needs of an organisation s current and potential customers It is a comprehensive approach which provides seamless integration of every area of business that touches the customer- namely marketing, sales, customer services and field support through the integration of people, process and technology CRM is a shift from traditional marketing as it focuses on the retention of customers in addition to the acquisition of new customers The expression Customer Relationship Management (CRM) is becoming standard terminology, replacing what is widely perceived to be a misleadingly narrow term, relationship marketing (RM)

86 Definition of CRM CRM is concerned with the creation, development and enhancement of individualised customer relationships with carefully targeted customers and customer groups resulting in maximizing their total customer life-time value

87 The purpose of CRM The focus *of CRM+ is on creating value for the customer and the company over the longer term When customers value the customer service that they receive from suppliers, they are less likely to look to alternative suppliers for their needs CRM enables organisations to gain competitive advantage over competitors that supply similar products or services

88 Why is CRM important? Today s businesses compete with multi-product offerings created and delivered by networks, alliances and partnerships of many kinds. Both retaining customers and building relationships with other value-adding allies is critical to corporate performance The adoption of C.R.M. is being fuelled by a recognition that long-term relationships with customers are one of the most important assets of an organisation

89 Why did CRM develop? CRM developed for a number of reasons: The 1980 s onwards saw rapid shifts in business that changed customer power Supply exceeded demands for most products Sellers had little pricing power The only protection available to suppliers of goods and services was in their relationships with customers

90 What does CRM involve? CRM involves the following : Organisations must become customer focused Organisations must be prepared to adapt so that it take customer needs into account and delivers them Market research must be undertaken to assess customer needs and satisfaction

91 Strategically significant customers Customer relationship management focuses on strategically significant markets. Not all customers are equally important Therefore, relationships should be built with customers that are likely to provide value for services Building relationships with customers that will provide little value could result in a loss of time, staff and financial resources

92 Markers of strategically significant customers Strategically significant customers need to satisfy at least one of three conditions : 1. Customers with high life-time values (i.e. customers that will repeatedly use the service in the long-term) 2. Customers who serve as benchmarks for other customers 3. Customers who inspire change in the supplier

93 Information Technology and CRM Technology plays a pivotal role in CRM Technological approaches involving the use of databases, data mining and one-to-one marketing can assist organisations to increase customer value and their own profitability This type of technology can be used to keep a record of customers names and contact details in addition to their history of buying products or using services This information can be used to target customers in a personalised way and offer them services to meet their specific needs This personalised communication provides value for the customer and increases customers loyalty to the provider

94 Face-to-face CRM CRM can also be carried out in face-to-face interactions without the use of technology Staff members often remember the names and favourite services/products of regular customers and use this information to create a personalised service for them. For example, in a hospital library you will know the name of nurses that come in often and probably remember the area that they work in. However, face-to-face CRM could prove less useful when organisations have a large number of customers as it would be more difficult to remember details about each of them.