Ch.

8 Developing new product

Focus on 4 questions/ issues :

- Why should companies develop new products or services
- Process firms use to develop new products
- How new products are adopted by consumers
- Diffusion of innovation theory
- Managing new products via the product life cycle theory

What is a product .
- Core product
- Core customer benefit/ value Augmented
- Actual product Actual
- Brand name, quality, packaging, design Lore
- Augmented product Product
- Associated services
product
- Such as financing, warranty, support
- Give u benefit Product
- Create need and profit
Example
Layers of a product .
- Core product or benefit/ value of water
- Quench thirst & hydrates us
- Other claims of value
- Increase energy & relieves fatigue 疲劳
- Helps you think
- Focus and concentrate
- Promotes weight loss
- Removes by-products of fat
- Reduces hunger
- Raises metabolism
- Zero calories
- Actual product
- Differentiation
- Physical features of the water
- Bottle
-Bother (shape, colour)
- Material (plastic vs glass)
- Brand names
- Logos
- Augmented product
- Associated services
- Delivery
- Installation
- Financing
 - Warranty
- Support services
- Ongoing maintenance

Why do firms develop new products/ services

- There must be an actual or perceived need, which may be the result of
- Market-pull
- Customers asking/ want it
- Unserved or underserved need
- Referred to as market-pull innovation
- Or technology-push
- Find the need, technical approach -> create a new product
- Company pushing the technology/ product since customers may not
recognize the need
- Typically
- Described as marketers creating the need for the product or
technology
- Aka technology-push innovation
- Example
- Ipad
- No consumers want a tablet
- After apple launched an ipad
- Create a new category call tablet

Why develop new products/ services?

- Reasons for develop new product
- Different factors

Why do firms create new products?

- Divers of new products or services
1. Changing customer needs
a. Pressure for a better product
b. Want more
i. Convenient
ii. Faster
iii. Cheaper
2. Market saturation E
3. Managing risk through diversity
a. New product -> decrease risk
4. Improving value
a. Add new features to a product
i. Increase value for the customers
5. Competitive pressures
a. Other brands have cheaper and better products
 6. Improving business relationships
7. Fashion cycle

How firms develop new products

- The new product development process begins with
- The new product ideas
:- A Culminates in the launch of the new product
- The evaluation of its success
- 6 general states
1. Idea generation 55
a. Development of viable new product ideas
i. Who give u new idea
ii. Where
iii. CustomerIconsumer
iv. Supplier
v. Other companies
vi. Anywhere around the world
2. Concept testing
a. Testing the new product idea among a set of potential customers
3. Product development 原型
a. Development of prototypes and/or the product
4. Market testing
a. Testing the actual products in a few test markets
5. Product launch
a. Full-scale commercialization of the product
6. Evaluation of results
a. Analysis of the performance of the new product and making appropriate
modifications

1. Idea generation
a. Firm division company functions locations
i. U can get a lot of ideas from everywhere
1. Customers
2. Competitors
3. Universities
4. Govt. research labs
5. Supplier
6. Nonprofits
7. Individuals
b. Who are involve to idea generations
i. Technical evaluation
1. Most senior employers
2. Marketing ppl
3. Many employers from different department
 a. Come tgt
i. Is this idea good for current business
ii. Do we have the material and technology and
equipment and people (talents/ professional)
4. Market physical/ assessment
a. Do this product have market
b. How far to take it into our business

ii.
c. Generate ideas for new products
i. Own internal R&D efforts
ii. Collaborate with other firms & institutions
iii. License technology from research-intensive firms
iv. Brainstorm
v. Research competitors’ products & service
vi. Conduct consumer research
d. Must constantly scan the environment looking for new product ideas
i. Depending on the company strategy
1. Use different sources

2. Concept testing
a. Concept is a brief written description of the product
b. Customers’ reactions determine whether it goes forward
c. Triggers the marketing research process
d. Technology changed our life
i. Eg. descriptions from changes
1. Video, post, show the concept and give the feedback
a. Eg. YT: smarts for stars concept car | drive it
i. X show the features but show the concept
ii. Feedback ->customers tell us what they want
1. Perfectly meet their demand
a. Such as what they want to see, their
options
2. Use a new concept
a. To generate the feedback
 i. Create a product perfectly
meet their demand
ii. Input on the concept
3. Decide should we go forward
a. Product development
e. Concepts are presented to potential buyers / users to gauge测量 their reactions

3. Product development
- Maybe build a new product
- New development
a. Prototype F
i. An engineering team develops
1. Based on research findings from the pervious concept testing step
ii. First physical form of a new product
iii. Allows customer to interact physically with product
iv. From a country to other country
v. Test a old product in a new country
vi. Eg.
1. 10 years warranty
a. Use own employees to test the product
2. Concept car revealed at auto shows
3. Never actually go into production
vii. First physical form of a new product
viii. Allows consumers to interact physically with product
b. Alpha testing
i. Whether product will perform according to its design
ii. Whether it satisfies customers’ needs
iii. Proof the features or selling point
1. Show the features
a. Test, or video,
i. Need evidence to proof
iv. Attempt to determine
1. Whether the product will perform according to its design
2. Whether it satisfies the need for which it was intended
c. Beta testing
i. Potential consumers examine the prototype in a real use setting to
determine its
1. Functionality
2. Performance
3. Potential problems
ii. Test the data or features or selling points
1. Whether change the product
2. Decide should u keep going
3. Example
 a. Materials test
b. Volume test
c. Weight test
4. Develop software
a. Bc everything can control by the software
i. Software provide most of the data
5. Real world example
a. Before it released Vista
i. Microsoft began beta testing in 2 years
1. Gather feedback from computer aficionados
爱好者

d. Market testing
- Test the market for the new product with a trial batch批量 of products
i. Premarket tests
- Conducted by research firms
- Eg. ACNielsen (BASES)
- Idea is to determine how many customers will try
- Continue to use the product/ service according to a small
group of potential consumers
1. Customers exposed
a. Test customers demand and expectation
b. Make sure consumers wouldn’t confuse many decision for
a new product
2. Customers surveyed
a. Give u the product, and try it out,
b. Decide should it launch it to market
3. Firm makes decision
a. A wrong decision maybe cause a huge problem
ii. Test marketing
- A new product is offered into a limited geographical area (a few
cities)
- Prior to the national launch
- Bc test marketing reveals a new product to
competitors
- Inappropriate to expose some new products
this way
1. Mini product launch
a. Have a Best place to test a product
b. Perfect demographic data
c. Different race, income, age
2. More expensive than premarket
3. Standard, controlled & simulated
 a. Give away information to competitor but get customer
feedback

4. Market testing
- Standard test markets
- Conducts a full marketing campaign in a few small test cities/ areas to guage
product performance
- Run the product in a certain store
- To give feedback
- Drawbacks
- Costly & time consuming
- Competitors try to distort impact by cutting $ or take other actions
- Customers get time to find weaknesses
- Develop their own strategies
- But competitors know ur new products and information and marketing strategy
- Controlled test markets
- Controlled panels of stores that agree to carry the new products for a fee
- Sales are tracked to gauge impact
- Drawbacks
- Concerns about size & representativeness of test markets
- Allow competitors to learn about the product
- Less costly & time consuming
- Simulated test markets
- Simulated shopping environment
- Sample of consumers are shown ads & promotions of product include the new
product
- Invite to a lab or real store & given $
- Which they can keep or use to buy products
- Including competing brands
- Test the
- Shelf location
- Shelf-space
- Displays
- Point-of-purchase promotions
- pricing
- Their purchases are tracked and are asked for the reasons for their purchases
- Follow-up interviews a couple of weeks later to
- Gauge 测量
- attitude
- Usage
- Satisfaction
- Repurchase intentions
- Drawbacks
- Less reliable
 - Simulated conditions
- Small samples
- Less costly & time consuming
- Clorox vs tide example
- While clorox was testing its new Clorox with bleach detergent
- Tide launched it own tide with bleach detergent nationally
- Became the segment leader
- Clorox later withdrew its detergent

5. Product Launch (launch + evaluation)

- New product
1. Timing
- Give competitive advantage
- Maybe not last for long
- Ur competitor stole ur position
- Copy ur product or service
- Stole ur technology and develop a similar product
- Then become a market leader
- Eg.
- my place vs facebook
- Apple music vs napster
2. Promotions
a. Black friday and thanksgiving
i. Reason for apple launch new iPhone on sept every year
b. Back to school
3. Place
4. Price
- If the market testing return with + results
- Introduce the product
- A product launch involves many things
- Confirming the target market
- Deciding how the product will be positioned
- Then the firm must finalize 敲定 its marketing mix variables
- Marketing budget for the 1st year
- The right product must hit the market at the right time and for the right price
- Matters little how good a product is
- If the launch lacks sufficient resources

6. Evaluation of results
- Satisfaction with performance
- Customer acceptance
- Met firm’s financial projections
- Met market performance
- After the product has been launched
 - Undertake a critical post launch review to determine
- Launch -> success/ failure
- What additional resources or changes to marketing mix are needed
- Marketers cannot only celebrate success
- Understand faiture
- Why a product fails is more important
- underperforming product require further development

Why do new products fail?

- Leaving too little time for product launch & marketing
- Ignore market testing information
- Company & innovators become too attached to the product
- Incremental products are more difficult to be successful
- New products
- Require education of consumers or may fail
- Too small target market
- Poor design, low product quality
- Incorrect positioning
- Wrong pricing strategy
- Poor marketing communications
- Competition
- Data
- ⅘ new products fail within first 3 years
- Example
- Crystal Pepsi
- was a caffeine-free,
- “clear alternative” to normal colas made by PepsiCo from 1992 to 1993 in
the U.S. and Canada.
- "You've never seen a taste like this”
- but consumers found the taste was not significantly different from other
colas.
- Gerber's Singles,
- a variety of fruits, vegetable and other entrees for adult consumers
- was launched in 1974 by the maker of baby food,
- but failed because adults didn't want to eat out of baby food jars.
-

Diffusion of innovation
- 4 Factors affecting product diffusion
- 4 factor that drive the technology is adopted
1. Compatibility ***
a. Extent to which new product is consistent with your needs & lifestyle
 2. Observability
a. Extent to which the product can be observed in use & showing its benefits
b. How many ppl
c. Product spread to reach customers
d. # customers, spread faster in the market
3. Complexity and trialability ETA'lE
a. Products requiring much learning takes longer
b. Being able to try the product reduces time to adoption
c. Hard and difficult to use
i. Take more time to adopt
4. Relative advantage
a. Degree to which a new product is superior to existing alternatives
b. Improvement of current product
- Using the diffusion of innovation theory/ adoption life
- Predict which types of customers will buy their new product/ service
- Immediately after its introduction
- Product gets more
- more accepted by the market
- With this knowledge
- Develop effective
- Promotion
- Pricing
- Other marketing strategies
- To pcuh acceptance among each customer group
=>

push
*
The PLC
- An important tool mangers
- Plan their marketing activities
 Summary of product life cycle characteristics, objectives, and strategies
*
Characteristics Introduction Growth Maturity Decline

Sales Low Rapidly rising Peak Declining

Costs High per customer Average per customer Low per customer Low per customer

Profits Negative Rising High Declining

Customers Innovators Early adopters Middle majority Laggards 落后者

Competitors Few Growing # Stable number Declining #

beginning to decline

Marketing Objectives

Create product Maximize market Max. profit while Reduce expenditure

awareness share defending market and milk and brand
share

Strategies

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

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

Distribution Build selective Build intensive Build more intensive Go selective: phase
out unprofitable outlets

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

Sales promotion Use heavy sales Reduce to take Increase to encourage Reduce to min. Level
promotion to entice advantages of heavy brand switching
trial consumer demand
- At each stage of the lifecycle, the marketing mix elements change in response to the
marketplace
Strategies for Extending the PLC
- Develop new uses
- For a product, baking soda can use in everywhere
- The for everything soda
- Bounce fabric sheets
- Keep closets, laundry hampers and gym bags smelling fresh
- News uses and users
- Modify product
- Change quality, performance, packaging
- Add the new features, new characteristics
- Add different use ways
- Eg. ipod
- Smaller models / offering more colours
- Increase frequency of use
- Increase the frequency
- Extra time period can use the product
- Eg.
- change breakfast food to all day food -> cereals to energy bar
- Campbells soups
- Published recipes
- Use soup as an ingredient in an entree
- Increase # of users
- Eg. swiss army knife
- Comes with LED light, USB key
- Find new users
- Be adoptive
- Eg. roller blade
- Levelled off 趋于平稳 in the teen/ young adult market
- The company looked to market to elementary school children and
older adults
- Reposition product
- A new target market
- 4ps
- Eg. Vitamin D -> ward off cancer
- Tweak调整 marketing strategy
- Apply to all the 4Ps