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(Abbie Griffen, University of Illinois, Urbana-Champaign

)

    

Learning Objective: categorize products by type – types of products DEFINITIONS: Products: are sets of features, functions, and benefits that consumers purchase. Features: are the ways that benefits are delivered i.e. provide the solution to customer problems. Brands: the name, representative symbol or design, or any other feature that identifies one firm’s product as distinct from another firm’s

Consumer products:

convenience products – inexpensive, bought with little effort, frequently used, Shopping products: more expensive, more time spent on selection, Specialty products: reflect consumer’s personality or selfimage, spend more time and effort – substitutes are not an option. Unsought products: not aware, unknown, or if known not actively sought unless made aware.

B. Business-to-business products:  Raw Materials  Supplies: not part of the finished product, inexpensive (pen, paper etc. standardized)  Accessories – standardized pieces of equipment that support the overall running of factories ,  Component parts and materials – partly assembled or already processed to be fitted into the finished products (tires, seats etc.),  Installations are major capital goods – buildings, laboratories, major equipment systems.

 Learning

Objective: define new product success and newness, and learn how to set the stage for creating success. A. Defining products: Newness, Success, and Failure

A new product is any product a firm spends money on to change, improve, or reduce cost. A combination of the newness to the market & newness to the firm, new-to-the-world are less than 10% The New Product Development Spiral – keep on bringing out new products through a process of Needs Understanding plus technological capability lead to the Stream of New Products – 3M

Fulfillment of the Objective. NPD Project Success: Three dimensions 2. Measure of Financial Success 3. Technical Performance Success 4. Success From the customers’ perspective – A. Market Share & B. Customer Satisfaction. one type of success is not enough

 Failure

to provide an advantage or performance improvement to customers over products already available in the market.  Lack of synergy with the technologies & manufacturing processes of the firm  Marketing synergies lack necessary distribution channels, promotion & selling practices, or pricing policies.  The product development process was not properly executed.

Contd. Learning Objective 2: setting the stage for successful new product development

B. Requirements for developing successful new products Firms should complete the following activities successfully.
6. 7. 8.

Uncover unmet needs & problems Develop a competitively advantaged product Shepherd products through the firm

Defining customer needs: the problems that a person or firm would like to have solved. Detailed needs are essentially difficult to learn as they are mostly specific to use in a particular context. Customer problems are complex, and frequently, different needs conflict – my internet needs and my son’s do differ.

 Methods

for Understanding Customer Needs: customers are capable of providing reliable information about products they have used and situations they have experienced – we can find out through qualitative market research (Ch.4)

Becoming the customer; observe own firm’s & competitors products & thus discover the problems.

2. Living with and critically observing those with the problems of interest . 3. Talking to (interviewing) people in depth about their problems – voice of the customer (in-depth interviewing to find out).

 Describe

strategies, processes, & organizational structures by which successful products are consistently developed. A. Product Development Strategy: provides the long-term destination for where the firm is going – be proactive, reactive, first, or second etc. B. Project strategy: the specific plan of how this project will succeed and why– the reason for undertaking this project (objective, goal, target market.

C. A Framework For Managing Product development: Stage-Gate Processes A formal Product Development Process defining the functions which are responsible for performing what tasks in what order, and in conjunction with the other tasks and functions. Stage-Gate process is a common NPD Process that decides the repeatable portion of product development into time-sequenced series of stages, each of which is separated by a management decision gate – won’t go beyond this stage if condition is unmet

 Generate

& screen ideas – find alternative “interesting” ideas which solve customer problems, fit the firm’s resources and present a profit-making opportunity at reasonable risk.

 Preliminary

Investigation: market assessment, technical feasibility assessment and financial assessments by a core team of marketing and technical experts – quick and dirty market study  Detailed Investigation: building a business case for the project so that top mgmt. can allocate the necessary resources or not. Justification requires a market analysis (size, segments etc) ,technical assessment, concept test, competitive analysis, and detailed financial analysis.

 2.

3. 4. 5.

Development: outputs of this stage are: A prototype that has been tested in-house for performance and in a limited way with customers for initial reaction. A mapped-out manufacturing process, with critical aspects pilot tested. A marketing launch plan A test and validation plan.

 Testing

& Validation: this stage provides final project validation. The product production process, and marketing strategy plan are all put through verification tests – confirming to mgmt. the expectations of project in terms of performance, volume, and profit will be met. & Launch. Full production and commercial selling.

 Commercialization

 Shepherding

is done by putting in place appropriate organizational processes, which includes developing project leaders to lead NPD process and navigate the politics of the organization, providing appropriate organizational structures within which to manage projects, and ensuring upper management support.

 For

smooth working of the project, Project Leadership can take several forms:  Project Leaders: appointed by the upper management with formal power and authority to complete the project. They guard the project’s objectives, continuously communicate with team member, serve as a translator across different functions, an dare the primary management contact point.

Mustering Management Support for NPD
 One

of the fundamental requirement of the successful NPD process is tangible & visible top management commitment to NPD.  NPD team must constantly strive to gain the attention of the top management to convince them that the particular project needs the necessary resources they must provide – make presentations, seek interviews, invite them on site (it must be worth top mgmt’s time & effort).

 Learning

Objective 4: making product decisions: branding, packaging, and labeling A. Branding decisions B. Packaging decisions C. Labeling decisions

Brands - used to simplify choices and reduce purchase risk for consumers Brand equity marketplace value of a brand based on reputation and goodwill

Brand name, logo, trademark should
Attract

attention Be memorable Help communicate the positioning of the product Distinguish the product

Branding

strategies

Individual

brand name strategy  Proctor and Gamble, General Mills, etc.

Branding
Family

strategies

brand name strategy like Pringles chips

 Branding

strategies

 Hybrids:

blanket family name, separate family names for types of products, family/individual brand combinations

 Packaging

provides:

 Protection  Identification  Information  Usage

enhancement  Disposal enhancement  Channel acceptance enhancement

 Labeling

helps customers by:
the manufacturer, country of origin,

 Identifying

ingredients  Reporting expiration dates, content grading  Explaining product use  Warning about potential misuse  Providing care instructions  Serving as a communications link between the user, eventual buyers, and the company

Product mode Price policy Place Promotion Profits

new use skimming or penetration strategies rapidly building distribution network build general demand expected loses

Introduction

Growth

Maturity

Decline

Product mode Price policy Place Promotion Profits

differentiated products maintain stable pricing policy solidify distribution channels and network generate secondary demand start of profits

Introduction

Growth

Maturity

Decline

Product mode Price policy Place Promotion Profits

modify product or product usage price reduction increase distribution efforts concentrate on product positioning highest profits (peak)

Introduction

Growth

Maturity

Decline

Product mode Price policy Place Promotion Profits

maintain a basic product maintain pricing or rise prices limit distribution efforts cut-back on advertising and sales promotions reduced profits

Introduction

Growth

Maturity

Decline

Innovators:
First purchasers of a new product s Venturesome, willing to accept risk, socially aggressive, communicative, and cosmopolitan
s

2.5%
Innovators

Early Adopters

Early Majority

Late Majority

Laggards

Early Adopters:
Are the next customers to buy new product s Enjoy leadership, prestige, and respect that early purchases bring s Tend to be opinion leaders s Adapt new ideas but use discretion
s

13.5%
Innovators Early Adopters Early Majority Late Majority Laggards

Early Majority:
First part of mass market s Outgoing, communicative, and attentive to information cues
s

34.0%
Innovators Early Adopters Early Majority Late Majority Laggards

Late Majority:
Second part of mass market s Less cosmopolitan and responsive to change s Include lower economic and social brackets, those past middle age, and skeptics
s

34.0%
Innovators Early Adopters Early Majority Late Majority Laggards

Laggards:
Last to purchase s Price conscious, suspicious of change, low income and status, tradition bound, and conservative s Often difficult to market to this small group
s

16.0%
Innovators Early Adopters Early Majority Late Majority Laggards