Professional Documents
Culture Documents
Mma6e Chapter 20
Mma6e Chapter 20
An Asian Perspective,
6th Edition
Instructor Supplements
Created by Geoffrey da Silva
Introducing New Market Offerings
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20
Learning Issues for Chapter Twenty
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Chapter Outline
• But the low success rate of new products and services points
to the many challenges they face.
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Chapter Outline
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New Product Options
Make or Buy??
• A company can add new products through acquisition or
development.
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Product Development Routes
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Types of New Products
• Fewer than 10 to 15 percent of all new products are truly innovative and
new to the world. These products involve the greatest cost and risk
because they are new to both the company and the marketplace.
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Incremental Improvements in Product Development
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Radical Innovations
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Challenges in New-Product Development
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The Innovative Imperative
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The Innovative Imperative
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Continuous Innovation
Japanese toiletry brand, Shokubutsu from LION Corporation, adds new variants to its body foam
product line with whitening, anti-bacteria, soothing, revitalizing, firming, nourishing, and
moisturizing qualities as part of its continuous innovation.
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New Product Success
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Disruptive Technologies
Electric cars like the Leaf are an example of a product with disruptive technology because they
change the way cars gain their energy, and hence, the competitive landscape.
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Ensuring New Product Success
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Developing a Successful Product Concept
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Local or Global Product Development?
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New Product Failure
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Drawbacks—New Product Failure
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Drawbacks—New Product Failure
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Lenovo’s LePad and LePhone were failures in China.
(Launched in 2011)
Lenovo posted disappointing sales of LePad even though it offered distinctive advantages over the
iPad. With no price advantage—it was priced almost similarly to the iPad—the more functional LePad
lost to Apple because Chinese consumers would rather own a high-status Apple product.
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Table 20.1: Causes of New-Product Failure
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Asian Implications for New Product Development
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Challenge of Creativity in Innovation (Asian
implications)
Creativity is less fostered in collectivistic Asia because like the tall tree which catches the wind,
employees are encouraged to fit in and not stand out.
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Asian Implications for New Product Development
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Asian Implications for New Product Development
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Organizational Arrangements
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Example of ‘Acceptance Criteria’ in New Product
Development
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Budgeting for New-Product Development
• Table 20.2 shows how a company might calculate the cost of new-
product development.
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Table 20.2: Finding One Successful New Product (Starting
with 64 New Ideas)
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Many failed prototypes are needed before finding
the winning product.
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Organizing New-Product Development
1. New-product manager
3. New-product department
4. Venture teams
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New Product Managers
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New Product Department
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Venture Teams and Cross-Functional Teams
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Stage-Gate System
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Stages in the New Product Development Process
• But the process is not always linear. Many firms use a spiral
development process that recognizes the value of returning to an
earlier stage to make improvements before moving forward
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Figure 20.1: The New-Product Development Decision
Process
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MANAGING THE DEVELOPMENT PROCESS: IDEAS
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Idea Generation
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Memo and Insights
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Marketing Memo: Ten ways to Find Great New-Product
Ideas
46
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DIG Framework
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The Three Elements of the DIG Framework
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Marketing Memo: Seven Ways to Draw New Ideas
from Your Customers
• Lists the seven ways that companies get new ideas from their
customers: observe, ask, use customer advisory boards, use
Web sites for new ideas, use the community of enthusiasts;
encourage challenges or improvements in your product.
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Marketing Memo: Seven Ways to Draw New Ideas
from Your Customers
50
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Interacting with Others
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Interacting with Others
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Lead users can be a good source of input when they innovate
products without the consent or even the knowledge of the
companies that produce them.
Young people who thrive on biking to the top of mountains gave inputs that led to the development
of mountain bikes—bikes that are sturdier and less likely to break down in such harsh terrains.
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Interacting with Employees
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Studying Competitors
• They can find out what customers like and dislike about
competitors’ products.
• They can buy their competitors’ products, take them apart, and
build better ones.
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Adopting Creativity Techniques
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Sampling of Techniques for Stimulating Creativity in
Individuals and Groups
a. Attribute listing
b. Forced relationships
c. Morphological analysis
e. New contexts
f. Mind-mapping
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Lateral Marketing
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Kinder Surprise = candy + toy (example of lateral
marketing)
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Using Idea Screening
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Figure 20.2: Forces Fighting New Ideas
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Using Idea Screening
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Table 20.3: Product-Idea Rating Device
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Idea Screening: The Probability of Success
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Innovation at McDonalds (India Market)
In India, McDonald’s innovates its menu to cater to local tastes. Workshops are held annually
involving management, the innovation team, chefs, suppliers, and even seasoning companies, to
develop new product ideas such as McVeggies and eggless pancakes.
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MANAGING THE DEVELOPMENT PROCESS:
CONCEPT TO STRATEGY
66
Product Idea and Product Concept
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Product Concept
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Examples of Concepts for a Product
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Product Concept
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Figure 20.3: Product and Brand Positioning
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Concept Testing
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Concept Testing
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Concept Testing
• Today firms can use rapid prototyping to design products (e.g., small
appliances or toys) on a computer, and then produce plastic models of
each.
• Potential consumers can view the plastic models and give their reactions.
• Companies are also using virtual reality to test product concepts. Virtual
reality programs use computers and sensory devices (such as gloves or
goggles) to simulate reality.
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An Example of an Articulated Product Concept
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Measuring Product Dimensions (arising from the
articulated product concept)
1. Communicability and believability—Are the benefits clear to you and
believable? If the scores are low, the concept must be refined or revised.
2. Need level—Do you see this product solving a problem or filling a need for
you? The stronger the need, the higher the expected consumer interest.
3. Gap level—Do other products currently meet this need and satisfy you?
The greater the gap, the higher the expected consumer interest. The need
level can be multiplied by the gap level to produce a need-gap score. A
high need-gap score means that the consumer sees the product as filling a
strong need that is not satisfied by available alternatives.
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Measuring Product Dimensions (arising from the
articulated product concept)
4. Perceived value—Is the price reasonable in relation to the value? The
higher the perceived value, the higher the expected consumer interest.
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Conjoint Analysis
• From this ranking, management can identify the most appealing offer and
the least appealing offer, and determine the importance level of each
attribute.
• Management can then estimate the market share and profit the company
might realize from different product offers.
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Conjoint Analysis
• Clearly, this consumer sees price and package design as the most
important attributes, followed by money-back guarantee, brand name, and
an ISO certification.
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Figure 20.4: Utility Functions Based on Conjoint Analysis
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Conjoint Analysis
• The company, however, may not launch the market offer that
promises to gain the greatest market share because of cost
considerations.
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Marketing Strategy Development
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Example of Articulated Target Market and Profit
Goals
• The target market for the instant breakfast drink is families with
children who are receptive to a new, convenient, nutritious, and
inexpensive form of breakfast.
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Marketing Strategy Development
An example:
The product will be offered in chocolate, vanilla, and strawberry in individual packets of six
to a box at a retail price of $2.49 a box. There will be 48 boxes per case, and the case
price to distributors will be $24. For the first two months, dealers will be offered one case
free for every four cases bought, plus cooperative-advertising allowances. Free samples
will be distributed door-to-door. Coupons for 20 cents off will appear in newspapers. The
total sales-promotional budget will be $2.9 million. The advertising budget will be $6
million, two-thirds of which will go into television and one-third into newspapers.
Advertising copy will emphasize the benefit concepts of nutrition and convenience. The
advertising-execution concept will revolve around a small boy who consumes the instant
breakfast drink and grows strong. During the first year, $100,000 will be spent on
marketing research to buy store audits and consumer-panel information to monitor market
reaction and buying rates.
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Marketing Strategy Development
An example:
The company intends to win a 25 percent market share and realize an after-tax return on
investment of 12 percent. To achieve this return, product quality will start high and be
improved over time through technical research. Price will initially be set at a high level
and lowered gradually to expand the market and meet competition. The total promotion
budget will be boosted each year by about 20 percent, with the initial advertising-sales
promotion split of 65:35 evolving eventually to 50:50. Marketing research will be reduced
to $60,000 per year after the first year.
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Business Analysis
• For one-time purchased products, sales rise at the beginning, peak, and
later approach zero as the number of potential buyers is exhausted.
• If new buyers keep entering the market, the curve will not go down to zero.
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Figure 20.5 (a): Product Life-cycle—
One-time Purchased Product
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Estimating Total Sales
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Figure 20.5 (b): Product Life-Cycle—
Infrequently purchased product
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Estimating Total Sales
91
Figure 20.5 (c): Product Life-Cycle—
frequently purchased product
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Estimating Total Sales
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Estimating Costs and Profits
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Estimating Costs and Profits
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Estimating Costs and Profits
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MANAGING THE DEVELOPMENT PROCESS:
DEVELOPMENT TO COMMERCIALIZATION
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Development and Commercialization
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Product Development
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Physical Prototypes
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Physical Prototypes
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Customer Tests
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Customer Tests
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Market Testing
• Others feel that they are sufficiently familiar with the market to
bypass this stage or fear that competitors might get wind of their
new products and imitate them.
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Market Testing
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Market Testing
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Consumer-goods Market Testing
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Sales-wave Research
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Sales-wave Research
• Advantages:
i. Implemented quickly
ii. Conducted with a fair amount of security
iii. Carried out without final packaging and advertising
• Disadvantages:
i. It does not indicate what trial rates would be achieved with
different sales-promotion incentives.
ii. Nor does it indicate the brand’s power to gain distribution and
favorable shelf positioning.
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Simulated Test Marketing
• The company notes how many consumers buy the new brand
and competing brands.
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Simulated Test Marketing
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Controlled Test Marketing
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Controlled Test Marketing
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Test Markets
• The company chooses the cities; the sales force tries to sell
the trade on carrying the product and giving it good shelf
exposure.
1. How many test cities—Most tests use between two and six cities. The
greater the maximum possible loss, the greater the number of contending
marketing strategies, the greater the regional differences, and the greater
the chance of test-market interference by competitors, the greater the
number of cities that should be used.
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Test Markets: Management Decisions
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Test Markets: Management Decisions
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Business-goods Market Testing
• A second common test method for business goods is to introduce the new
product at trade shows.
• Industrial manufacturers come close to using full test marketing when they
give a limited supply of the product to the sales force to sell in a limited
number of areas that receive promotion support and printed catalog sheets.
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Introducing New Business Products at Trade Shows
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Commercialization
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When (Timing)
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When (Timing)
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When (Timing)
3. Late entry—The firm might delay its launch until after the
competitor has entered. The competitor will have borne the
cost of educating the market, and its product may reveal
faults the late entrant can avoid. The late entrant can also
learn the size of the market.
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When (Timing)
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Some companies take their time in introducing new
products, as in the case of Huawei.
Chinese tech giant Huawei takes its time to decide what new products it wants to make. But once it
has made its decision, it makes sure the new product will succeed.
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Where (Geographic Strategy)
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To Whom (Target-Market Prospects)
• Within the rollout markets, the company must target its initial
distribution and promotion to the best prospect groups.
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To Whom (Target-Market Prospects)
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How (Introductory Market Strategy)
• The company must develop an action plan for introducing the new
product into the rollout markets.
• Any delay in any activity on the critical path will cause the project
to be delayed. If the launch must be completed earlier, the planner
searches for ways to reduce time along the critical path.
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The Consumer-adoption Process
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Stages in the Adoption Process
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Adopters of new products have been observed to
move through five stages:
1. Awareness—The consumer becomes aware of the innovation but lacks
information about it.
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Readiness to Try New Products and Personal
Influence
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Figure 20.6: Adopter Categorization on the Basis of
Relative Time of Adoption of Innovations
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The Five Adopter Groups
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The Five Adopter Groups
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Asian Perspective on Personal Influence on
Innovation Adoption
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Asian Perspective on Personal Influence on
Innovation Adoption
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Internet Adoption
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Organizations’ Readiness to Adopt Innovations
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Schema for Chapter Twenty
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Thank you