Product Development

Types of New Product Introductions

High

Low

New product lines

20%

Improvements toexisting products

26%

Additionsto existing

product lines26%

Repositionings 7%Cost

reductions11%

New-to-world products10%

HighNewness to market

New

ness

to c

ompa

ny

Size of circle denotes number of introductions relative to total.

Idea GenerationIdea Generation

ScreeningScreening

Concept Develop-ment & Testing

Concept Develop-ment & Testing

Marketing StrategyMarketing Strategy

Business AnalysisBusiness Analysis

Product DevelopmentProduct Development

CommercializationCommercialization

Test MarketingTest Marketing

The New Product Development Process

Product DevelopmentProduct Development

Create (engineer) prototype versions of the physical

product.

Test for performance (lab)

Test prototypes with convenience samples for

functional, aesthetic, psychological performance

(taste, use, feel, appearance).

Actual or projected product comparison tests

(blind/not blind) with users/experts or influencers.

Test MarketingTest Marketing

Completed “offering bundles” designed and prepared for marketing response

Sales wave studies -- selected sample, free trial, offered repeat brand options.

Simulated Test Marketing Controlled Test Marketing Test Marketing

Test marketing should take full advantage of information gathering -- well beyond sales projections

CommercializationCommercialization

Scope

Timing

Location

Operational Plan

AwarenessAwareness

InterestInterest

EvaluationEvaluation

TrialTrial

AdoptionAdoption

New Product Adoption Process

Loyalty?

Time of Adoption of InnovationsTime of Adoption of Innovations

Laggards 16%

LateMajority

34%

EarlyMajority

34%

Early Adopters 13.5%

Innovators 2.5%

Adopter Categories

Adopter Categorization on the Basis of Relative Time of Adoption of Innovations

PLC and Boston matrix

Five product characteristics influence the rate of adoption:

• Degree of relative advantage• Degree of compatibility• Degree of complexity• Degree of divisibility or trial-ability or risk• Degree of communicability

SOME REASONS FOR NEW PRODUCT FAILURES

1. Market too small2. Poor match or fit with company 3. Not new / Not different 4. No real benefit5. Poor positioning Vs competition 6. Forecasting errors7. Poor Timing8. Competitive Response too good9. Changes in Customer tastes10. Poor after sales service 11. Insufficient return on investment12. Lack of coordination in functions13. Inadequate support14. Poor recovery strategies

Place, Distribution, Channels, Logistics, Order fulfillment, Supply Chain, Route-to-Market… …

Concepts

– Importance of distribution – Players in distribution– Objectives of distribution

Channels of distribution– Channel system – flows and costs– Channel structure for consumer products– Channel structure for services– Channel structure for industrial products

Channel Management Goals

• Efficiency vs Effectiveness

• Control vs. Flexibility • Learning and Knowledge

Marketing Flows in a Channel

4. Information Flow

5. Promotion Flow

Customer

Customer

Customer

Customer

Advertising Agency

Suppliers

Suppliers

Suppliers

Suppliers

Suppliers

1. Physical Flow

2. Title Flow

3. Payment Flow

Customer

Transporters Warehouses

Manufacturer

Transporters

Warehouses

Dealers Transporters

Manufacturer Dealers

Banks Manufacturer

Banks Dealers

Banks

Transporters

Warehouses Banks

Manufacturer

Transporters

Warehouses Banks

Dealers

Transporters Banks

Manufacturer

Advertising Agency

Dealers Activation

Agency

Costs Associated with channel functions

• Physical Possession: Breaking bulk , Storage and delivery/installation cost

• Ownership: inventory carrying cost• Promotion: personal selling, advertising, sales promo,

PR• Negotiation: time and legal cost• Financing: credit terms, terms and conditions of sale• Risk Taking: warranty, insurance, repair, damage,• Ordering: order-processing cost• Payment: collection, bad debt cost

Traditional Distribution Model: Disadvantages

• Distribution Costs High As % of Cost Price• Distributor margins do not Represent The

Activity Cost• No Visibility of Stock in The Supply Chain• End Customer Knowledge Limited• No Control Over End User Pricing• Concerns Over Product ‘Diversion’ & Cross

Border Trade

Channel Management Decision areas

1. Channel tasks

2. Channel Structure

3. Channel Goals

4. Channel Design

5. Channel Configuration

6. Channel Conflicts

Channel Design Process

1. Recognize the need forchannel design decision

1. Recognize the need forchannel design decision

7. Selectchannel members

7. Selectchannel members

5. Evaluaterelevant variables

5. Evaluaterelevant variables

6. Choose the “best”channel structure

6. Choose the “best”channel structure

2. Set & coordinatedistribution objectives

2. Set & coordinatedistribution objectives

3. Specifydistribution tasks

3. Specifydistribution tasks

4. Develop alternative channel structures

4. Develop alternative channel structures

Retailing

• Formats and Types of Retailing• Emerging Retail Scenario in India; Size, Growth Rate etc.. • Complexity of The Indian Retail Market

Traditional Formats

Itinerant SalesmanHaatsMelas

Mandis

Established formats

Kirana shopsConvenience/

department storesPDS/

fair price shopsPan/ Beedi shops

Emerging Formats

Exclusive retail outletsHypermarket

Discount StoresSeconds Stores

Malls / Specialty MallsMultiplexes

Shop-in-shopsService galleries

The Evolution of retail in India

What are CSFs for Retail?

• Merchandising • Financing and other services• Branding and Private Labels• SCM – Inventory Turnover• Data Analytics and Decisions• REAL ESTATE MANAGEMENT• STORE DESIGN• STORE OPERATIONS

Services Marketing

• How are Services different from Products?• The Marketing Challenges Posed by Services• The Expanded Marketing Mix Required for

Services

Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services

Physical Elements

High

Low Intangible Elements High

SaltDetergents

CD PlayerWine

Golf ClubsNew Car

Tailored clothingFast-Food Restaurant

Plumbing RepairHealth Club

Airline FlightLandscape Maintenance

ConsultingLife Insurance

Internet Banking

The Four I’s of Service Intangibility Services cannot be held, touched, or

seen before the purchase decision.

Inconsistency Service quality varies with the capabilities of the people whoprovide the service.

Inseparability The consumer cannot separate the deliverer of the service from the service itself.

Inventory The inventory cost of a service isthe cost of paying the person usedto provide the service along with the cost of any

needed equipment.

Services are DifferentGoods Services Resulting ImplicationsTangible Intangible Services cannot be inventoried.

Services cannot be patented.Services cannot be readily displayed or communicated.Pricing is difficult.

Standardized Heterogeneous Service delivery and customer satisfaction depend onemployee actions.Service quality depends on many uncontrollable factors.There is no sure knowledge that the service deliveredmatches what was planned and promoted.

Productionseparate fromconsumption

Simultaneousproduction andconsumption

Customers participate in and affect the transaction.Customers affect each other.Employees affect the service outcome.Decentralization may be essential.Mass production is difficult.

Nonperishable Perishable It is difficult to synchronize supply and demand withservices.Services cannot be returned or resold.

Services Pose Distinctive Marketing Challenges

• Marketing management tasks in the service sector differ from those in the manufacturing sector

• The eight common differences are:

1. Most service products cannot be inventoried2. Intangible elements usually dominate value creation3. Services are often difficult to visualize and understand4. Customers may be involved in co-production5. People may be part of the service experience6. Operational inputs and outputs tend to vary more widely7. The time factor often assumes great importance8. Distribution may take place through nonphysical channels

• What are marketing implications?

Key Concept

A Service is delivered (not made), experienced (not used), availed (not owned) and highly personal. (not replicable)

The 8Ps of Services Marketing

• Product Elements

• Place and Time

• Price and Other User Outlays

• Promotion and Education

• Process

• Physical Environment

• People

• Productivity and Quality

Marketing of causes (ideas), persons, events and places

• A distinction between causes (ideas), persons, events and places marketing and marketing of products/services

1. Person Marketing– to cultivate attention, interest, & preference of a

target market toward a person

2. Place Marketing– attract visitors to a particular area

3.Event Marketing– mkt of sporting, cultural, & charitable activities to

selected target markets

4. Organization Marketing– seek to influence others to accept the goods of,

receive the services of, or contribute in some way to an organization

Cause marketing or Idea marketing

• “A strategic positioning and marketing tool that links a company or brand to a relevant social cause or issue, for mutual benefit.”

• “A commercial activity by which businesses and charities or causes form a partnership with each other to market an image, product or service for mutual benefit.”

Issues and target audience

• Funds and volunteers raising• Identifying three target audiences

– The first target audience – decision makers– The second – people: social marketing– The third – firms

Who is the target audience?

Target Example Communications

People Stop smoking All

Legal systemNo smoking in public places Voters

FirmsDo not close a

factory Boycott

Social marketing

• What is the difference between Cause marketing and Social Marketing?

• Social marketing is the use of marketing principles and techniques to influence a target audience to voluntarily accept, reject, modify or abandon a behavior for the benefit of individuals, groups, or society as a whole

Affecting people

Social arena:Social issue

Health:Birth Defects

Safety:Drowning

Environment: water supply and quality

Community involvement: voting

Target audience Pregnant women Parents of toddlers Homeowners who live in the suburbs

College students living out of state

Accept a new behavior

Take a multivitamin…

Put a life vest on your toddler at the beach

Replace your lawn with native plants and ground cover

Apply for an absentee ballot

Reject a potential behavior

Do not drink alcohol

Never leave your toddler alone in the bathtub

Do not use fertilizers that contain toxic chemicals

Do not submit an application if you have a permanent absentee ballot

Modify current behavior

Drink at least eight glasses of water a day

To model the behavior, parent should always wear life vests when boating

Water deeply but slowly, so it penetrates and reaches roots

Read details about candidates and issue

Abandon an old behavior

If you smoke, quit Do not use “water wings” as a substitute for a life vest

Do not water your lawn if it’s going to rain

Mail your ballot before deadline

4Ps Promotion: messages on coasters at bars

Product: retail displays of coast-guard-approved life vest

Price: $50 rebate on electric mulching movers

Place: absentee ballots online

Benefit Healthier babies Safer toddlers Water availability for the community and lower rates

Youths experience having a voice S

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