Postgraduate Diploma in Sport and Recreation Management

Sport and Recreation Strategic Marketing

SPRM6002/2055/L01
LESSON 8

NEW PRODUCT DEVELOPMENT

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MARKETING GROWTH STRATEGIES

§ Market Penetration

§ Market Development

§ Diversification

§ Merger and Acquisition (M&A)

§ New Product Development (NPD)

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Why do we develop new product?

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https://youtu.be/2rV8QoyxBnU?si=mFImnrvuursw1-qK
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Why do we develop new product?

§ A need to replace aging products
§ A need to stimulate sales
§ A desire to capture a new consumer need
§ A desire to improve the company’s reputation
§ A desire to expand
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What is New-product
Development?
The development of original products through:

§ product improvements
§ product modifications
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NEW PRODUCT DEVELOPMENT (NPD)

It means creating original products, product improvements, product
modifications, new product lines/assortments, or new brand/sub-
brand.

“Product development and innovation is a

thin line between success and failure.”

New products are important to both customers and

companies: WHY?

§ For customers: New products bring new solutions and

variety to their lives.

§ For companies: New products are a key source of revenue

growth
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NEW PRODUCT DEVELOPMENT (NPD)

New product development can be very costly and risky as NPD does
not guarantee success.

§ Overestimate market size

§ Poorly designed

§ Incorrectly positioned

§ Launched at the wrong timing

§ Pricing strategy is not correct

§ Not properly advertised

§ Not appreciated by the customers

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GENERAL CHARACTERISTIC OF NPD

1. Profit making potential 6. Risk factors of both investment
and development
2. Increase competitive
advantage 7. Enhance product protection
– IP
3. Expand market size
8. Impact on industry or to
4. Investment component consumers

5. Organization priority 9. Unforeseeable reaction of

the consumers

10. Access to new market/service

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HOW DO WE GENERATE IDEAS?

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Stages in NEW Product Development

Stages in NEW Product Development
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Step 1: Idea Generation
The systematic search for new product ideas
Major sources of new ideas:
Internal sources
Formal R&D
Employees
External sources
Customers
Competitors
Distributors
Suppliers
Agencies
Marketing research firms
Universities
Inventors
Crowdsourcing
Customers
Independent scientists/researchers
General public
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Step 1: Idea Generation

Ideas generation approach :

1. Brainstorming

2. Storyboard

3. Attribute listing:
o Quality
o Features
o Design
o Style

4. SCAMPER model

S – Substitute
C – Combine
A – Adapt
M – Modify
P – Put to another use
E – Eliminate
R - Reverse
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Step 1: Idea Generation

Ideas generation approach :

5. Mind Mapping

https://youtu.be/o1WhjPh3ZQ4
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Step 2: Idea Screening
Identify good ideas and eliminate poor ideas

R-W-W screening framework:

§ Is this Realistic?

§ How likely it’s going to Win?

§ Is it Worth trying?
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Step 3: Concept Development and Testing

§ Concept development is a process

driven by a set of customer needs
and target product specification,
which are then converted into a set of
conceptual designs and potential
technological solutions.

§ These solutions represent an

approximate description of form,
working principles and product
features. It is also called
“prototype” that facility decision
making.

§ Prototype: original concept sample.

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Step 3: Concept Development and Testing

Concept/Prototype testing

It is a way of measuring sport consumer

enthusiasm through reaction to a picture,
written statement, or oral description of
the proposed sports product.

§ Communicability and believability

§ Perceived value

§ Reaction of potential customers

§ Purchase intention
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Step 4: Marketing Strategy Development

§ Designing an initial marketing

strategy for a new product based on
the product concept.

§ STDP model
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Step 5: Business Analysis

§ A review of the sales, costs, and

profit projections for a new product
Demand to find out whether these factors
satisfy the company’s objectives.
Cost
Considerations in § A further review of payback period,
Business Analysis rate of return (e.g. ROMI) and needs
Stage
Sales for capital fund is also essential.

Profitability
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Step 6: Product Development

§ Developing the product concept into

a physical product to ensure that
the product idea can be turned into
a market offering.

§ Often, products undergo rigorous

tests to make sure that they
perform safely and effectively, or
that consumers will find value in
them.
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Step 7: Test Marketing
The stage of new product development in which the product and its proposed marketing
program are tested in realistic market settings.
§ The placing of a new sports
product/service in one or more
selected areas/markets to
observe actual performance.

§ It lets the company test the

product and its entire marketing
program
q Targeting
q Positioning
q Advertising
q Distribution
q Pricing
q Branding
q Packaging
q Budget
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Step 7: Test Marketing
NEW PRODUCT DEVELOPMENT PROCESS
7. Test Marketing :
The placing of a new [sports] product/service in Test Marketing Decisions:
one or more selected areas/markets to
observe actual performance. § How many test cities/areas?
 It lets the company test the product and its
entire marketing program—targeting and § Which cities/locations?
positioning strategy, advertising, distribution,
pricing, branding and packaging, budget levels. § Length of time for the testing
period?

§ What type of information to collect?

§ Who to review the results?

§ What action to take after the

reviewing?
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Step 8: Commercialization

Commercialization is the process of

transforming ideas, knowledge and
inventions into greater wealth for
individuals, businesses and/or society at
large.

§ Introducing a new product into the

market.

§ New product development that focuses

on finding new ways to solve customer
problems and creating more customer-
satisfying experiences.

§ Most successful new products are ones

that well differentiated from the
competitors.
Stages in NEW Product Development
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Product Development Model

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The course of a product’s sales and profits over its lifetime.

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Characteristic and objectives of Product Life Cycle (Kolter, 2018, P.297)

Introduction Growth Maturity Decline

Sales Low sales Rapidly rising sales Peak sales Declining sales

Costs High cost per Average cost per Low cost per Low cost per
customer customer customer customer
Profits Negative Rising profits High profits Declining profits
Customers innovators Early adopters Mainstream Lagging adopters
adopters
Competitors Few Growing number Stable number Declining number
beginning to decline

Marketing Create product Maximize market Maximize profit Reduce

objectives engagement and share while defending expenditure and
trial market share milk the brand
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Characteristic and objectives of Product Life Cycle (Kolter, 2018, P.297)

Introduction Growth Maturity Decline

Product Offer a basic product Offer product Diversity brand and Phase out weak items
extensions, service, models
warranty

Price Use cost-plus Price to penetrate Price to match or beat Cut price
market competitors

Distribution Build selective Build intensive Build more intensive Phase out unprofitable
distribution distribution distribution outlets

Advertising Build product Build engagement and Stress brand Reduce to level
awareness among interest in the mass differences and needed to retain hard-
early adopters and market benefits core loyalist
dealers

Sales promotion Use heavy sales Reduce to take Increase to encourage Reduce to minimal
promotion to entice advantage of heavy brand switching level
trial consumer demand
Group Discussion: (10min.)
1. Pair up
2. Discuss 3 Ideas to extend product life cycle
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PRODUCT LIFE-CYCLE
 Thecourse of a product’s sales and profits
over its lifetime, which includes five stages:
Product development, introduction, growth,
maturity, and decline
Group discussion:

§ Pair up.

§ Select one sports brand example in the market which is a

good representation of the assigned stage to your group.

§ 15min.

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PRODUCT LIFE-CYCLE
2. Introduction Stage:
 A stage in which a new product is first distributed and
made available for purchase
 Introduction takes time, and sales growth is apt to be
slow.
 During this stage, as compared to other stages, profits
are negative or low because of the low sales and high
distribution and promotion expenses.
 Because the market is not generally ready for product
refinement at this stage, the company and its few
competitors produce basic versions of the product.
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PRODUCT LIFE-CYCLE
3. Growth Stage:
 A stage in which a product’s sales start climbing
quickly.
 The early adopters will continue to buy, and later
buyers will start following their lead, especially if
they hear favorable word of mouth.
 As a result, sales and profits increase.
 As new competitors enter the market, they will
introduce new product features, and the market will
expand.
 Companies keep their promotion spending at the same
or a slightly higher level, as prices remain where they
are or drop slightly.
 Educating the market remains a goal, but now the
company must also meet the competition.
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PRODUCT LIFE-CYCLE
4. Maturity Stage:
 A stage in which a product’s sales growth slows or
levels off, in which it normally lasts longer than the
previous stages.
 The slowdown in sales growth results in many
producers with many products to sell and the
possible substitute products in the market.
 Thus, this overcapacity leads to greater competition
and a drop in profit and prices.
 Some of the weaker competitors start dropping out,
and the industry eventually contains only well-
established competitors, in which most successful
ones are actually evolving to meet changing
consumer needs by modifying the market and
marketing mix.
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PRODUCT LIFE-CYCLE
5. Decline Stage:
 A stage in which a product’s sales decline, in which
the pace of decline can be fast or slow.
 Reasons for decline:
 Technological advances
 Shifts in consumer tastes
 Increased competition
 Ways to deal with a product at the decline stage:
 Maintain the product: Repositioning or reinvigorating it in hopes
of moving it back into the growth stage of the product life cycle.
 Harvest the product: Reducing various costs, hoping that sales
hold up.
 Drop the product from its line: The company can sell the product
to another firm or just pull it off from the shelf (stop producing
and selling the product)
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PRODUCT LIFE-CYCLE
 Product Life-Cycle Patterns:
 Style: A basic and distinctive mode of expression, which may
last for generations and pass in and out of vogue
 Fashion: A currently accepted or popular style in a given
field, which tends to grow slowly, remain popular for a while,
and then decline slowly.
 Fad: A temporary periods of unusually high sales driven by
consumer enthusiasm and immediate product or brand
popularity.
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Reference:
§ Ansoff, H. I. (1965). Corporate strategy. McGraw-Hill: New York.
§ Blakey, P. (2011). Sport Marketing. Learning Matters Ltd.
§ Chadwick, S. and Beech, J. (2007). Introduction: the marketing of
sport. In: J. Beech and S. Chadwick, eds., The marketing of sport.
Prentice Hall.
§ Kotler, P., and Armstrong, G. (2018). Principles of marketing.
Harlow: Pearson Education Limited.
§ Mullin, B., Hardy, S. and Anthony, W. (2007). Sport marketing.
Champaign, Il: Human Kinetics.
§ Pitts, B.G. and Stotlar, D.K. (2013). Fundamentals of sport
marketing. Morgantown, W.Va.: Fitness Information Technology.