MM – D

Ch-15

Introducing New Market Offerings

 New Product Options

Make or Buy: (Acquisition or Development)

Acquire companies, patents, license or franchise.

(Nestle)

Development of new products from within-

Organic growth.

Createnew products in lab, contract with

independent researchers or firms. (Samsung)
Types of New Products:

New-to-the-world creating an entirely new market

(Google) to minor improvements or revisions of
existing products. (Sony)

Need strong R&D, right corporate culture and customer

understanding for radical innovations.

Use focus groups, observations, feedbacks, online chats,

product focused blogs.

Challenges: Technological and market uncertainty,

competition, investment cost, short PLC, funding
sources.
Challenges in New Product Development:

1. The Innovation Imperative-

Continuous innovation is a necessity.

Otherwise issues of changing customer

needs and tastes, shortened product life
cycles, increased competition and new
technologies.
2. New Product Success-

With smartphone adoption, mobile apps are

lucrative business with innovation (Angry
Birds).

New companies can create disruptive

technologies that are cheaper and alter
competitive space.
3. New Product Failure-

Fragmented markets
Social, economic, governmental constraints
Cost of development
Capital shortages
Shorter required development time
Poor launch timing
Shorter product life cycle
Lack of organizational support
 Organizational Arrangements

Budgeting for New Product Development-

Finance as many projects as possible.

Percentage of sales figures.

Spend what the competition spends.

Decidehow many successful new products they need

and work backward to estimate investment required.
Organizing New Product Development-

Companies can handle organizational aspect

of new product development with:

Product Managers
New product Managers and Department
Growth leaders
Innovation catalysts
High level Management committee
Cross-functional teams-

They have to develop specific products or

business and relieved of other duties, given a
budget, time frame and informal workplace. (3M)

Crowdsourcing- Engage external participants in

the new product development process. (P&G-
smart detergent)

Stage-gate systems- Divide innovation process

into stages with a check point at the end of each.
 Managing the New product development
process:
1. Generating Ideas-

Interacting with employees-

Toyota employees submit 2 million ideas

annually.

Top Management could also be a source of

ideas (intel).
Interacting with Outsiders-

External sources could be customers,

scientists, engineers, consultants etc.

In-depthinterviews could be used for

customer needs identification.

BlankLabel- Design own unique shirt.

UseCrowdsourcing to create content- Baskin

Robbins contest for next flavor.
Competitors- Research products and
services of competitors.

What customers like and dislike about

those products.

Buy those products, take them apart and

build better ones.

Ask Sales representatives.

2. Idea Screening-

To drop poor ideas as early as possible. Without

errors. Eg- FRIENDS

Describe:
◦ Product idea
◦ Target market
◦ Competition
◦ Market size
◦ Product price
◦ Development time and costs
◦ Manufacturing costs
◦ Rate of return
3. Concept Development and Testing-

Idea is a possible product, concept is its elaborate

version in consumer terms.

Product Idea- Add powder to milk to increase nutrition

and taste.

Who will use it? What is the primary benefit? When will
people consume it?

Concept 1- Instant drink for adults in breakfast

Concept 2- Tasty snack for children midday
Concept 3- Health supplement for older adults late
evening.
If instant breakfast is selected:

Product positioning map

Brand Positioning Map
Concept Testing:

Present
product concept to target
consumers and get reactions.

Use of prototypes- Rapid prototyping and

virtual reality.

Conjointanalysis used to measure

consumer preferences for product concepts.
4. Marketing Strategy Development:

A) Describe target market size, structure

and behavior, planned brand positioning,
sales, market share, and profits sought in
first few years.

B) Outline planned price, distribution

strategy and marketing budget for first year.

C) Describe long run sales and profit goals

and marketing mix strategy over time.
5. Business Analysis-

Evaluate proposal’s business attractiveness.

A) Estimate Total Sales-

Sum of estimated first time sales,

replacement sales and repeat sales.

One time products (Retirement home)

Infrequently purchased products (Car)
Frequently purchased products (FMCG)
B) Estimate Costs and Profits-

Costsestimated by R&D, manufacturing,

marketing and finance departments.
6. Product Development-

Translatetarget customer requirements into a

working prototype by Quality function
deployment (QFD)

Physical prototypes- Performs safely under

normal use and conditions and produced in
budgeted costs.

Customer tests- Alpha testing within firm,

refine and then Beta testing with customers.
(P&G diaper, lip colour)
7. Market Testing-

Product is ready to be branded with name,

logo and packaging.

Difficult to kill a project based on market

testing.

High investment high risk warrant more

market testing.
8. Commercialization-

Contract for manufacture, communication

tools for awareness and then loyalty.

Very expensive, use of crowdfunding.

When- Timing (First, parallel, late entry)

Where- Geography
To whom- Target market prospects
How- Introductory market strategy
Stages in Consumer Adoption Process:

1. Awareness- Consumer becomes aware of innovation

2. Interest- Consumer stimulated to seek information about

innovation

3. Evaluation- Consumer considers whether to try the

innovation

4. Trial- Consumer tries the innovation

5. Adoption- Consumer decides to make full and regular use

of the innovation
Factors influencing Adoption process:
A) Readiness to try new products-

1. Innovators- Technology enthusiasts. For low prices, conduct

alpha and beta testing and report weaknesses.

2. Early Adopters- Opinion leaders. Search for new technologies

and less price sensitive.

3. Early Majority- Pragmatists. Adopt new technology when its

benefits have been proven and lot of adoption has taken place.
Mainstream market.

4. Late Majority- Skeptical conservatives, risk averse, technology

shy and price sensitive.

5. Laggards- Tradition bound, resist innovation until no longer

defensible.
B)Personal Influence- Effect of a person on
another’s attitude or purchase probability is
important in evaluation stage and on those
who adopt later. (Nike- skateboarding
market)

C) Characteristics and rate of adoption-

Different products take different time for
acceptance.
Characteristics that influence rate of
adoption:

1. Relative Advantage- Over existing

products
2. Compatibility- With user values
3. Complexity- Difficult to understand or use
4. Divisibility- Tried on limited basis
5. Communicability- Benefits are
observable or describable
Organization’s readiness to adopt
Innovations-

Adoption is associated with organization

(size, profits), its environment (income,
progressiveness), and administrators (age,
education level).

Eg- New piece of medical equipment

manufacturer would identify innovative
hospitals.