L8 Marketing management - product development

Different categories of new products

- New-to-the world products (or discontinuous innovations)

- New product lines

- Additions to existing product lines

- Improvements or revisions of existing products

- Repositioned products

- Cost reductions/low priced products

New-to-the world products (or discontinuous innovations)

- Rarest and create entirely new markets, widely known, smallest category of new products, and disruptive - meaning they turn the world upside down. E.g. Uber and Airbnb, that were new at the start but now widely known.

New product lines

- New category of a product that a company haven't offered yet e.g. findus selling fish and meat providing a pea option. Allows a company to enter an already established market.

Additions to existing product lines

- Addition to a firm's established product or service (offerings) e.g. Polly introducing new limited-edition flavors.

Improvements or revisions of existing products

- Involves changes, either significant or slight e.g. Rice Krispies adding vanilla flavor, minerals, vitamins.

Repositioned products

- Targets new markets or market segments e.g. ICA basic's packaging change to shift consumers perception of their cheap looking products and Barbie's evolution to include diverse looks and professions.

Cost reductions/low priced products

- Offer similar performance to competing brands at a lower price e.g. through selling smaller and compact packages.

Developing new products are important because:

- Important to sustain growth, increase revenues and profits, and replace obsolete items.

- Reaching more people that haven

- Building a better business, financial success and encourage business growth, economic and general sustainability.

The new-product development process:

new product strategy, idea generation, idea screening, business analysis, development, test marketing, commercialization, new product

New-product strategy

- Links the new-product development process with the objectives of the marketing department, the business unit, and the corporation.

- Provides guidelines for generating, screening and evaluating new-product ideas.

Idea generation: Involves collecting numerous ideas from different sources such as:

o Customers: Understanding their wants and needs can inspire.

o Employees: Use their in-depth knowledge of the company's products and processes.

o Distributors: Sales teams can gather insight drom distributors who have direct interaction with customers and can identify unmet needs.

o Competitors: Observing their activities and innovations.

o Research and development: Scientists in labs generate new product ideas, turns ideas into sellable products.

o Consultants: They can recommend product ideas based on their expertise.

o Other experts: Including university research. Brainstorming helps generate creative solutions.

Idea screening

1. The initial filter in the development process to eliminate unfeasible, inconsistent with the organization's new-product strategy or are inappropriate.

a. Concept test: Be used to test and evaluate a new-product idea with potential consumers to get their reactions, usually before any prototype has been created.

b. It's an evaluation process where the assess the feasibility without investing anything.

Business analysis

Evaluate the financial viability, if the idea will be successful by calculating demand, cost, sales and profitability

Business analysis key points:

a. Things that affect the accuracy of the revenue projections are: The newness of the product the market size and competition.

b. Analyzing overall economic trends and their impact on estimated sales are important for product categories that are sensitive to fluctuations in the business cycle.

Development: Involves:

a. Creating a prototype.

b. Sketching a marketing strategy (4ps)

c. Decision on packaging, branding and labeling.

d. Outlining preliminary promotion, price and distribution strategies

e. Examining manufacturing feasibility.

- Simultaneous product development - happens simultaneously rather than sequentially.

Test marketing

1. Business do a limited introduction, meaning launching a new product in a small and controlled market without fully releasing through marketing programs to determine the reaction of potential customers in a market situation.

Test marketing can:

o This allows management to evaluate alternative strategies and to assess how well the aspects in the marketing mix work and fit together.

o Can observe competitors responses e.g. if their product flops or go well.

o Can be done in limited locations

high costs of test marketing

· High costs over a million

· Time consuming: Takes a year or more

· Exposes new product and its marketing mix to competitors that might interfere before the introduction.

· Competitors can interfere and disrupt with their own promotions by introducing own sales, pricing, promotions and advertising campaigns.

o Alternatives to test marketing:

· Scanner based research: Test the products performance in the market.

· Simulated (laboratory) marketing testing e.g. using VR glasses without investing or spending a little to test. They test products in a controlled environment.

· Online test marketing: Be faster and more cost effective. Where target customers see ads and promotions for new products online in a real or mock store, to record their purchases.

Commercialization: Final stage in launching a product, where they bring it to the market. The process includes, we need to decide things when launching:

· Ordering production materials and equipment

· Starting production

· Building inventories

· Shipping the product to field distribution points

· Training the sales force

· Announcing the product to the trade

· Advertising to potential customers

Why some products succeed and others fail:

· No real benefit compared to existing products: Fast food companies trying to sell healthier options fail because consumers visit them for unhealthy food. Coca-Cola Life, the green "healthy" cola, also failed.

· Overestimation of market size.

· Incorrect targeting or positioning: Needs to be a good match between the product and market needs.

· Other examples of failures include Google Glasses, Apple Newton, Windows Vista (due to technical problems), and Heinz colored tomato sauce

Global issues in new product development

Through globalization of markets and competition gives a reason for why multinational firms consider doing new-product development from a worldwide perspective. To succeed in other countries companies must develop products that meet the unique local needs of these populations. E.g. different features for cars that are standard in some countries or added in others.

The bottom of the pyramid

Include countries with financial struggles, by a brand positioning based on the needs of the people at the bottom of the pyramid e.g. offering smaller packaging sizes due to lack of space and affordability, single items, different types of products that fit circumstances e.g. single use washing powder.

The diffusion of innovations

the process whereby a new product, service, or idea spreads through a population.

Innovation

- Any product or idea that seems new to potential users.

Diffusion

- Process where more and more people start using or accepting that innovation. E.g. smartphones, innovators are the first to get the new products and test them, later few early adopters try them as well after, later early majority joins in and becomes mainstream, then the innovators leave to try a new market leading to a late majority where it's reducing, til it ends at laggards that are the last people to use them.

Innovators (2.5%)

· These are the first to buy new products, eager to try them and often waiting for their release, almost an obsession.

Early Adopters

· They follow innovators, seek to be cool, and often influence others' opinions. They desire the respect of others - dominant characteristic among early adopters.

Early Majority

· They follow early adopters and rely on personal reviews and comments rather than just advertising. They are an important link in the diffusion process.

Late Majority

· They adopt later, often due to social pressure to conform. They mainly depend on word-of-mouth communication than mass media.

Laggards

· These are slower to adopt, often older individuals who have been waiting. Some products may never be adopted by 100% of the population

The speed at which a new product becomes popular, rate of acceptance and diffusion of a new product depends on five key factors:

· Complexity: If a product is difficult to understand or use, people take longer to diffuse, adopt it.

· Compatibility: The more a product fits with people's existing habits or needs, the faster they accept it. Incompatible diffuse slower.

· Relative advantage: If a product is clearly better than what's already available, adoption speeds up.

· Observability: When people can easily see the benefits of using a product, they are more likely to try it.

· Trialability: The degree to which a product can be tried on a limited basis.

Marketing implications of the adoption process include:

What helps a product move through the market?

· Word-of-mouth (WoM) e.g., influencers

· Advertising (and marketing communication) targeted specifically at the various adopter categories e.g., different communication with laggards than with innovator, both require different information,a product might fail if early innovators and adopters don't like it.

Product life cycle:

introductory stage, growth stage, maturity stage, decline stage

- Introductory stage

· High failure rates

· Little competition

· Frequent product modification

· Limited distribution

· High marketing and production costs

· Sales increase slowly

· Profits turn negative

· Promotion focuses on awareness and information

· Communication challenge is to stimulate primary demand.

- Growth stage:

o Increasing rate of sales

o Entrance of competitors

o Large companies may start to acquire small pioneering firms

o Aggressive brand advertising and communication of the differences between brands

- Maturity stage

o Sales increase at a decreasing rate

o Saturated markets

o Annual models appear

o Lengthened product lines

o Service and repair assume important roles

o Heavy promotions to consumers and dealers

o Marginal competitors drop out

o Niche marketers emerge

- Decline stage:

o Long-run drop in sales

o Large inventories of unsold items

o Elimination of all nonessentials marketing expenses

o Discontinue purchasing the products

Identifying these stages can be difficult due to seasonal variations. Not all products follow this traditional cycle. Different patterns exist for:

· Styles: Selling seasonally.

· Fashions: More traditional and lasting trends.

· Fads: Very popular for a short time, like fidget spinners or ChatGPT avatars.

· Revivals: Products that sell, die, and then become popular again.

· Classics: Products that remain popular over a long period, like Coca-Cola.

· Flops: Products that generate initial excitement but ultimately fail.

Relationship Between the Diffusion Process and the Product Life Cycle:

The diffusion process and the product life cycle are connected. As the later majority adopters stop purchasing, the product life cycle moves towards the decline stage. Understanding when a product is in its maturity phase and when certain adopter groups are moving on is crucial for managing the product's life. Marketing messages may need to change over time, as a message for early adopters won't resonate the same way with later adopters

IMPLICATIONS FOR MARKETING MANAGEMENT

• The message may need to change over time.

• A message developed for and targeted toward early adopters will not be

perceived similarly