Introducing New

Market Offerings
 Learning Objectives

1. How can new products be categorized?

2. What challenges does a company face in developing new products and services?
3. What organizational structures and processes do managers use to oversee new-product
development?
4. What are the main stages in developing new products and services?
5. What is the best way to manage the generation of new ideas?
6. What factors affect the rate of diffusion and consumer adoption of newly launched products and
services?
New-Product Options
Buy other companies
Buy patents from other companies
Buy a license or franchise from another company
New-to-the-world items
Improvise existing products
 Challenges in New-Product
Development
The innovation imperative
◦ Continuous innovation is a necessity

New-product success
◦ Incremental innovation vs. disruptive
technologies
New-Product Failure
• Fragmented markets • Shorter development
• Social, economic, and time
government • Poor launch timing
constraints • Shorter PLCs
• Development costs • Lack of organizational
• Capital shortages support
Examples of Product Failure:
1. Google Glass (2013)
2. Kanoa Wireless Headphones, Kanoa (2015)
3. Tata Nano (2008)
4. EV1, General Motors (1996-1999)
Process of NPD
Innovative businesses thrive by understanding what their market wants, making
smart product improvements, and developing new products that meet and
exceed their customers' expectations.
'New products' can be:
products that your business has never made or sold before but have been taken
to market by others
product innovations created and brought to the market for the first time. They
may be completely original products, or existing products that you have
modified and improved.
New-Product Development Process
Generating Ideas
Interacting with employees
Interacting with outsiders
Studying competitors
Adopting creativity techniques

Eg: P&G
Ways to Find New-Product Ideas
• Informal customer • Iterative rounds with
sessions customers
• Time off for technical • Keyword search to scan
people to putter trade publications
• Customer brainstorming • Treat trade shows as
• Survey your customers intelligence missions
• “Fly on the wall” • Have employees visit
research supplier labs
• Set up an idea vault
Ways to draw new ideas from customers
 Observe customers using product
 Ask customers about product problems
 Ask customers about dream products
 Use customer advisory board
 Use Web sites
 Form brand community of enthusiasts
 Challenge customers to improve product
Forces Fighting New Ideas
Using Idea Screening (Weighted Index
Method)
Using Idea Screening
The company can monitor and revise its estimate of the product’s overall probability of success, using
the following formula:
Concept to Strategy
Concept development

◦ Figure (a): product-positioning map

◦ Figure (b): brand-positioning map

Concept to Strategy
Concept testing responses

Communicability &
Perceived value
believability

Need level Purchase intention

User targets, purchase

Gap level
occasions & frequency
 After receiving this information, researchers measure product
dimensions by having consumers respond to questions like these:

1. Communicability and believability—“Are the benefits clear to you and believable?” If the scores are
low, the concept must be refined or revised.
2. Need level—“Do you see this product solving a problem or filling a need for you?” The stronger the
need, the higher the expected consumer interest.
3. Gap level—“Do other products currently meet this need and satisfy you?” The greater the gap, the
higher the expected consumer interest. Marketers can multiply the need level by the gap level to
produce a need-gap score. A high score means the consumer sees the product as filling a strong need
not satisfied by available alternatives.
4. Perceived value—“Is the price reasonable in relationship to value?” The higher the perceived value,
the higher is expected consumer interest.
5. Purchase intention—“Would you (definitely, probably, probably not, definitely not) buy the product?”
Consumers who answered the first three questions positively should answer “Definitely” here.
6. User targets, purchase occasions, purchasing frequency—“Who would use this product, when, and
how often?”
 Concept to Strategy
Marketing strategy development following a successful concept test
1. Target market’s size, structure, & behavior; the planned brand
positioning; the sales, market share & profit goals in first few years
2. Planned price, distribution strategy, and marketing budget for the first
year
3. Long-run sales & profit goals and marketing-mix strategy over time
Concept to Strategy
Business analysis

◦ Estimating total sales: Total estimated sales are

the sum of estimated first-time sales, replacement
sales, and repeat sales

◦ Product Life-Cycle Sales for Three Types of

Products
 Development to Commercialization
Product development

◦ Physical prototypes: The goal of the R&D department is to find a prototype

that embodies the key attributes in the product-concept statement,
performs safely under normal use and conditions, and can be produced
within budgeted manufacturing costs.

◦ Customer tests: alpha & beta testing: Alpha testing tests the product within
the firm to see how it performs in different applications. After refining the
prototype further, the company moves to beta testing with customers.
 Methods of Consumer-Goods Market
Testing
1. Sales-Wave Research: Consumers who initially try the product at no cost are reoffered it, or a competitor’s
product, at slightly reduced prices. The offer may be made as many as five times (sales waves), while the
company notes how many customers select it again and their reported level of satisfaction.

2. Simulated Test Marketing: 30 to 40 qualified shoppers are asked about brand familiarity and preferences in a
specific product category and attend a brief screening of both well-known and new TV or print ads.

3. Controlled Test Marketing: The company with the new product specifies the number of stores and geographic
locations it wants to test. A research firm delivers the product to a panel of participating stores and controls
shelf position, pricing, and number of facings, displays, and point-of-purchase promotions.

4. Test Markets The ultimate way to test a new consumer product is to put it into full-blown test markets. The
company chooses a few representative cities and puts on a full marketing communications campaign, and the
sales force tries to sell the trade on carrying the product and giving it good shelf exposure.
 Development to Commercialization
1. First entry—The first firm entering a market usually enjoys
the “first mover advantages” of locking up key distributors and
customers and gaining leadership. But if rushed to market
First entry before it has been thoroughly debugged, the first entry can
backfire.
2. Parallel entry—The firm might time its entry to coincide with
the competitor’s entry. The market may pay more attention
Parallel entry when two companies are advertising the new product.
3. Late entry—The firm might delay its launch until after the
competitor has borne the cost of educating the market, and its
Late entry product may reveal flaws the late entrant can avoid. The late
entrant can also learn the size of the market.
 Development to Commercialization
Commercialization
◦ Where (Geographic Strategy)
◦ To Whom (Target-Market Prospects)
◦ How (Introductory Market Strategy)
The Consumer-Adoption Process
Adoption
◦ An individual’s decision to become a regular user of a product
Stages in the
Adoption Process
Awareness

Interest

Evaluation

Trial

Adoption
Factors Influencing the Adoption Process
Readiness to try new products and personal influence
Factors Influencing the Adoption Process
1. Relative advantage—the degree to which the innovation
appears superior to existing products.
2. Compatibility—the degree to which the innovation matches
consumers’ values and experiences.
3. Complexity—the degree to which the innovation is difficult
to understand or use.
4. Divisibility—the degree to which the innovation can be tried
on a limited basis.
5. Communicability—the degree to which the benefits of use
are observable or describable to others.
Factors Influencing the Adoption Process
Organizations’ readiness to adopt innovations
Organizational Arrangements
Budgeting for New-Product Development