Assignment and Reflection about Principles of Marketing

Developing and Managing Products

Unrestricted

• Sustain growth • Increase revenue/profit • Replace obsolete items

Why introduce new products?

• New-to-the-world: discontinuous innovations • New product lines: enter an established market • Product line additions • Improvements or revisions • Repositioned products: existing products • Lower-priced products: like competition, but at

a lower price

Categories of new products

1. New product strategy

2. Idea generation

3. Idea screening

4. Business analysis

5. Development

6. Test marketing

7. Commercialization

8. New product

New product development process

• “Plan that links the new product development process with the objectives of the:

• Marketing department • Business unit • Corporation”

• Should specify the role the new products will play in the organization’s overall strategy

New product strategy

• Sources of new-product ideas • Customers • Employees • Distributors • Competitors • Research and development • Consultants • Other experts

Idea generation

• Screening: • Eliminates ideas that are inconsistent with

organizational strategy or are inappropriate for some other reason

• Concept test: • Test to evaluate a new-product idea, usually before

any prototype has been created • Involves consumer reactions to product descriptions

or visual representations of the proposed new product

Idea screening and concept test

Demand Cost

Sales Profitability

Business analysis stage

• “The stage in the product development process in which a prototype is developed and a marketing strategy is outlined”

• Involves: • Prototype • Marketing strategy • Packaging, branding, and labeling • Promotion, price, and distribution strategy • Examining manufacturing feasibility

Development

• Team oriented approach • Marketing, R&D, engineers, production, and suppliers • Shortens process and reduces costs

Development

• Test marketing: • “Limited introduction of a product and a marketing

program to determine the reactions of potential customers in a market situation.”

• Alternatives to test marketing: • Scanner-based research • Simulated market testing • Online test marketing

Test marketing

• Decision to market a product involves: • 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

Commercialization

Why do some products fail?

• No discernible benefit compared to existing products

• Poor match between product features and customer desires

• Overestimation of market size • Incorrect targeting • Too high or too low prices • Inadequate distribution

Reasons for product failure

Diffusion of Innovation

Spread of new products

Complexity Compatibility Relativeadvantage

Observability Trialability

Product characteristics and rate of adoption

Product life cycles

• 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

Introductory stage

• Increasing rate of sales • Entrance of competitors • Market consolidation • Initial healthy profits • Aggressive advertising of the differences between

brands

• Wider distribution

Growth stage

• Sales increase at a decreasing rate • Saturated markets • Annual models appear • Lengthened product lines • Service and repair assume important roles • Heavy promotions to consumers and dealers • Marginal competitors drop out • Niche markets emerge

Maturity stage

• Long-run drop in sales • Large inventories of unsold items • Elimination of all nonessential marketing expenses • Organized abandonment

Decline stage

• Long-run drop in sales • Large inventories of unsold items • Elimination of all nonessential marketing expenses • Organized abandonment

Decline stage