Unit 3: New Product

Development, Diffusion & PLc

 New-Product Development
• What is new product?
• Major stages in new product development
 What is new product?
• Original products
• Product improvements
• Product modifications
• New brands that the firm develops through its
own research and development efforts
 New-Product Development Strategy

Acquisition refers to the buying of a whole company, a patent, or

a license to produce someone else’s product

New product development refers to original products, product

improvements, product modifications, and new brands
developed from the firm’s own research and development

9-5
 KFC Zinger Launch Case
https://youtu.be/npGuekfDd0s
 KFC Zinger Launch Case
Discussion Questions
• What were the main reasons that KFC decided to introduce
this new product?
• Why did they need to test market the product, given that it
was already successful in over 100 countries?
• Did they need such an elaborate launch – which included
launching of the chicken sandwich into space – given that it is
a popular product internationally and would probably sell well
anyway?
• Based on the information provided only, can you outline the
key components of their new product process?
 Major stages in new product
development
• Idea generation
• Idea screening
• Concept development and testing
• Marketing strategies
• Business analysis
• Product development
• Test marketing
• Commercialization
 Think and Answer

Q1. Why New Products Fail?

 New-Product Development Strategy

Reasons for new product failure

• Overestimation of market size
• Poor design
• Incorrect positioning
• Me Too
• Wrong timing
• Priced too high
• Ineffective promotion
• Management influence
• High development costs
• Competition

9-6
 Recap Time: Q2
List the steps of NPD in the right sequence
 Product Adoption & Diffusion
Speed of Diffusion for Innovations (25% Adoption, US)
• –Automobile: 58 years “The Americans have need of the
• –Telephone: 36 years telephone, but we do not. We have plenty of
messenger boys.” – Sir William Preece,
• –Radio: 22 years
Chief Engineer, British Post Office, 1878
• –Personal Computer: 16 years
• –Mobile Phone: 13 years “This telephone has too many
shortcomings to be considered as a means
• –World Wide Web: 7 years of communication. The device is of
inherently no value to us.” – Western
Union internal memo, 1876

“Getting a new idea adopted, even when it has obvious

advantages, is often very difficult.” – Rogers, 1962
 What is diffusion?

• Transfer of information to customers about

innovations
• Decisions by buyers to adopt the innovative
product or process
• Eventual saturation of the market by the new
generation of products or processes
Consumer Adoption Process

Adoption: An individual’s decision to become a

regular user of a product
Adopter Categorization of the Basis of Relative Time of Adoption of
Innovations

http://designdamage.com/blog/index.php/200909/when-to-adopt-social-media-for-your-
business/
Marketing Implications of Adoption
Process
Two types of communication:
• Word of mouth communication (Opinion
leaders and influencers)
• Communication directly from the marketer to
potential adopter
Product Based Framework for Diffusion (Roger’s
Five Factors, 1995, 2003)
Relative advantage: ‘the degree to which an innovation is perceived
as being better than the idea it supersedes’

Compatibility: ‘the degree to which an innovation is perceived as

consistent with existing values and values of the potential adopter’

Complexity: ‘degree to which an innovation is perceived as relatively

difficult to understand and use’

Trialability: ‘degree to which an innovation may be experimented

with on a limited basis’

Observability: ‘degree to which the results of an innovation are

visible to others’
 Generic Marketing Actions that impact five factors
Relative Advantage
•Pricing (e.g. reducing price, partitioning price over time, performance based pricing)
•Market segmentation (e.g. first to market to those with greatest need)
•Product design (e.g. focus on features whose benefits are most apparent)
•Promotion/Consumer education (e.g. explain benefits of product features)

Compatibility
•Framing/Positioning (e.g. position so as to be consistent with existing values/norms)
•Product Naming (e.g. name so as to foster appropriate comparisons)

Complexity
•Promotion/Consumer Education (e.g. explain the complexity of the technology)
•Product design (e.g. simplify product usage)

Trialability
•Promotion (e.g. free samples for inexpensive products, introductory or free trial period for
more expensive products)
•Product placement (e.g. place product in places that are generally accessible to
consumers)

Observability
•Product design (e.g. increase visibility of product where possible)
 Samsung Case Discussion
• Review the key facts, major issues and root causes of those
issues

• Where is the smartphone in its product lifecycle, and how

should that position inform Samsung’s strategy going forward?

• Should Samsung pursue profitability, even at the expense of

market share?
• Price Premium= Market share % (Rs. based)/
Market share % (Unit based)
• P.P. (Apple) = 60/30
• Market (Rs.)= 10Cr
- Apple Vs Samsung= 6:4 or 60% and 40%
• Market (Units)= 1.2lakhs
- Apple Vs Samsung= 3:7 or 30% or 70%
 Marketing Strategies: Introduction
Stage
• Pioneering advantages
– Recall of brand name
– Establishes product class attributes
– Captures more uses in middle of market
• Pioneering drawbacks
– Imitators can surpass innovators
– Once leadership is lost, it’s rarely regained
Long-Range Product Market
Expansion Strategy
 Marketing Strategies: Growth
Stage
• To sustain rapid market share growth now:
– Improve product quality and add new features
– Add new models and flanker products
– Enter new market segments
– Increase distribution coverage and enter new
distribution channels
– Shift from awareness and trial communications to
preference and loyalty communications
– Lower prices to attract the next layer of price-sensitive
buyers
Marketing Strategies: Maturity
Stage

Market modification

Product modification

Marketing program
modification
Market Modification
Marketing Strategies: Decline Stage

• Eliminating Weak Products

• Harvesting and
Divesting
Marketing in a Slow-Growth
Economy
 Explore upside of increasing investment
 Get closer to customers
 Review budget allocations
 Put forth compelling value proposition
 Fine-tune brand and product offerings