MARKETING (WEEK 4 – NOV 8)

NEW-PRODUCT DEVELOPMENT
Step 1: IDEA GENERATION
 Mr. Dui developed an idea from his OBSERVATION from existing companies
 Source of Ideas:
- Customers & users
- Competitors
- Market research
- Other markets
- Company People
 Analyze new and different views of the company’s markets
 Study present consumer behavior
 Spot opportunities that have not yet occurred to competitors or to potential customers
 Analysis of consumer complaints
 Reverse engineering (buying competitors’ products and look for ideas or improvements)

Step 2: SCREENING
 Strengths and weaknesses
 Fit with objectives
 Market trends
 Rough ROI estimate
 Evaluating new ideas with SWOT analysis, long-run trends analysis and thorough understanding of the
company’s objectives
 Competitive advantage/ strategy for a new product to hold up for the whole product life cycle
 Consider how new product will affect consumers over time (consumer welfare)
 Each idea that passes the screening criteria goes on to the next step through comparing ROI for each
idea (if firm is ROI-oriented)
 Most attractive alternatives are pursued first
 Objectives of New Idea (overview only):
- Provide a variety of street foods and endorse a breakthrough product in the market
- To satisfy customers in innovative designs or presentation of street food products
- Be the best company in that category

Step 3: IDEA EVALUATION

 Concept testing
 Reactions from customers
 Rough estimates of costs, sales, and profits
 Uses marketing research (hypothesis-testing process) - ranging from informal focus groups to formal
surveys of potential customers
- Hypothesis-testing process - looking for evidence that an idea is not a good opportunity for the
firm and should be rejected
 Should gather enough information to decide whether there is an opportunity, whether it fits with the
firm’s resources and whether there is a basis for developing a competitive advantage
 Estimation of likely costs, revenue, and profitability at this stage
 Identification of potential market size
  If results are discouraging, kill the idea
 Idea evaluation - more precise in business markets
- Potential buyers - more informed and their needs to focus on the economic reasons for buying
rather than emotional factors
- New products substitute existing ones
 Compare cost advantages and limitations of a new product with those currently being used

By interviewing well-informed people, they can determine the range of product requirements
and decide whether there is an opportunity

Step 4: DEVELOPMENT
 R&D
 Develop model or service prototype
 Test marketing mix
 Revise plans as needed
 ROI estimate
 Further analyzation using R&D and engineering to design and develop prototype
- Example: computer-aided designs (CAD)
 Product tests with customers (can lead to revision)

Step 5: COMMERCIALIZATION
 Finalize product and marketing plan
 Start production and marketing
 “Roll out” in select markets
 Final ROI estimate
 Product idea that survived this far can finally be placed in the market
 Putting a product in the market = expensive
- Manufacturing or service facilities should be set up
- Costs on distribution channels
- Costs on manpower (training and salaries)
- Introductory promotion costs (higher to a more competitive market)
 Product “roll-out”
- Usually, city by city or region by region (gradually) until they complete market coverage
- Permit more market testing, but main purpose is to do a good job implementing the marketing
plan
 Marketing managers need to play close attention to control- to ensure that the
implementation effort is working and that the strategy is on target
 NEW-PRODUCT DEVELOPMENT
Stage 1: Market Introduction (Investing in the Future)
 Condition
- Low sales because the consumers are unaware of the product
 Marketing strategy:
- Invest in informative promotions that will highlight the advantages and uses of the new product;
create superior value
- Build channels of distribution (give incentives to win cooperation)
 It will take some time for the consumers to learn that the product is available.
 Most companies experience losses because they spend too much for Product, Place and
Promotion development

Stage 2: Market Growth (Profits go up and down)

 Condition
- Industry sales grow fast
 The innovator begins to make bigprofits as more and more customers buy
 This is the time of biggestprofits for the industry
 It is also the time of rapid sales and earnings growth for companies with effective strategies
- Industry profits rise and then start falling
 They start to decline as new players enter the market and consumer price sensitivityincreases
 Competitors will copyor improve the product
 They will make betteroffers to consume some of your target market.
 Marketing strategy:
- Branch out
- Persuasive promotions that create product differentiation

Stage 3: Market Maturity (Sales level off, profits continue to go down)

 Marketing Strategy
- Provide satisfaction and gain your consumers’ trust to build a strong relationship.
- Happy and contended customers will not switch to a new brand.
- Persuasive promotion
- Innovate a new product with special uses and applications.
- Gradual phase-out strategy; cut losses

Stage 4: Sales Decline (A Time of Replacement)

 Condition
- Old products -> new products
 Marketing Strategy
- Phasing out: Can still earn small profits from a dying product if competitors moveout too quickly
and there is still an Ongoing demand