New-Product Development Strategic Launch Planning LECTURE-30

Chapter Questions  New product development strategy  New product development process  Marketing strategy development  Strategic launch planning  How brand equity provides value  The evaluation tasks In the new product process

New-Product Development Strategy Acquisition refers to the buying of a whole company, a patent, or a license to produce someone else’s product. New product development refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development. Two ways to obtain new products

What Is a Successful New Product? Although you may hear much higher percentages, careful studies supported by research evidence suggest that about 40% of new products fail -- somewhat higher for consumer products, somewhat lower for business-to- business products.

New-Product Development Reasons for new product failure Overestimation of market sizePoor designIncorrect positioningWrong timingPriced too highIneffective promotionManagement influenceHigh development costsCompetition

New-Product Development Process Major Stages in New-Product Development

New-Product Development Process Idea generation is the systematic search for new- product ideas Sources of new-product ideas  Internal  External Idea Generation

New-Product Development Process Internal sources refer to the company’s own formal research & development, management and staff. External sources refer to sources outside the company such as customers, competitors, distributors, suppliers. Idea Generation

New-Product Development Process  Marketing strategy development refers to the initial marketing strategy for introducing the product to the market.  Marketing strategy statement includes:  Description of the target market  Value proposition  Sales and profit goals Marketing Strategy Development

New-Product Development Process Business analysis involves a review of the sales, costs, and profit projections to find out whether they satisfy the company’s objectives Marketing Strategy Development

New-Product Development Process Product development involves the creation and testing of one or more physical versions by the R&D or engineering departments  Requires an increase in investment Marketing Strategy Development

New-Product Development Process Test marketing is the stage at which the product and marketing program are introduced into more realistic marketing settings. Provides the marketer with experience in testing the product and entire marketing program before full introduction. Marketing Strategy Development

New-Product Development Process Commercialization is the introduction of the new product  When to launch  Where to launch  Planned market rollout Marketing Strategy Development

Managing New-Product Development Successful new-product development should be:  Customer centered  Team centered  Systematic

Strategic Launch Planning Some Important corporate decisions.  A specified gross margin: Affects funding.  Speed-to-market: Affects promotional outlays and schedules.  Commitment to a given channel: Affects distribution plan.  Advertising policy: Affects promotion decisions.  Pricing policy: Affects decision to use penetration or skimming pricing (slide down demand curve).

Revision of Pre-determined Goals  Customer Acceptance Goals  Customer Acceptance  Customer Satisfaction  Sales  Market Share  Financial Performance Goals  Time to break even  Margins  Profitability (IRR, ROI)  Product Level Performance Goals  Product Cost  Time to Market  Product Performance  Quality Guidelines  Other  Competitive Effect  Image Change  Morale Change

Strategic Platform Decisions  Permanence  Permanent, stand-alone.  Permanent, but as a bridge to other items -- e.g., platform strategy.  Temporary. Given firms’ tendency to develop streams of products, more and more new products are actually only temporary.  Aggressiveness  Aggressive versus cautious attitude at entry  Type of Demand Sought  Primary versus selective

Strategic Platform Decisions  Competitive Advantage  Differentiation, price leadership, or both  Competitive Relationship  Aim at a competitor, avoid a competitor  Image  Create a new image, tweak an existing image, use the already-existing image

Product Line Replacement Strategies

Scope of Market Entry This is not test marketing. This is launch. All forces in place and working.  Roll out slowly -- checking product, trade and service capabilities, manufacturing fulfillment, promotion communication, etc.  Roll out moderately -- but go to full market as soon as volume success seems assured.  Roll out rapidly -- full commitment to total market, restricted only by capacity.

The Target Market Decision  Alternative ways to segment a market  End-use, geographic/demographic, behavioral/psychographic, benefit segmentation  Micromarketing and mass customization  Also consider the diffusion of innovation

Product Positioning  Who -- Why -- How  To whom are we marketing?  Why should they buy it?  How do we best make the claim?

Why Should They Buy It?  “How likely would you be to buy this if we marketed it?”  Formatted in three ways:  Solves major problem current products do not.  Better meet needs and preferences.  Lower price than current items.

How Do We Make the Claim?  Product positioning statement is a strategic driver --a core item -- not a list of advantages. Some new products get one short sentence -- technical items more.  Can be stated as one or more features (what it is).  Can be stated as a function (how it works).  Can be stated as one or more benefits (how the user gains).  Can be stated as a surrogate (no features, functions, benefits).

Branding Decisions  What is the brand’s role or purpose?  Are you planning a line of products?  Do you expect a long-term position in the market?  How good is your budget?  Physical/sensory qualities of brand considered?  Message clear and relevant?  Is Insulting or irritating to anyone?

How Brand Equity Provides Value High Brand Loyalty Other Brand Assets More/Better Brand Associations High Perceived Quality High Brand Awareness Reduced marketing costs Increased trade leverage Patents or trademarks Strong channel relationships Creates positive image Helps customer process information Supports quality positioning Supports higher-price strategy Easier to make brand associations Increased liking and familiarity Provides value to customer:  Assists in customer information processing  Increases confidence in purchase  Increases satisfaction in product use Provides value to firm:  Increases effectiveness of marketing programs  Increases customer loyalty and trade leverage  Facilitates brand extensions  Is a source of competitive advantage

Building Brand Equity  Getting awareness of the brand and the meaning.  Making brand associations  Building perceived quality  Loyalty in repurchase  Getting reseller support

The Evaluation Tasks In The New Product Process Opportunity Identification/Selection Concept Generation Concept/Project Evaluation Development Launch Direction: Where should we look? New product Process Phase Evaluation Task Initial Review: Is the idea worth screening? Full Screen: Should we try to develop it? Progress Report: Have we develop it? If not, should we continue to try? Market Testing: Should we market it? If so, how? In retrospect

 Marketing Management – A South Asian Perspective by Philip Kotler, Kevin Lane Keller, Abraham Koshy & Mithileshwar Jha, 13th Edition, Published by Pearson Education, Inc.  New Product Management by Merle Crawford and Anthony Di Benedetto, 9th Edition McGraw Hill Irwin.  Principles of Advertising & IMC by Tom Duncan 2 nd Edition, Published by McGraw-Hill Irwin.  Principles of Marketing by Philip Kotler & Gary Armstrong Thirteenth Edition, Published by Prentice Hall Bibliography

The End: Don’t use time or words carelessly. Neither can be retrieved.