Key terms & New product development

Learning objectives Explain how companies find and develop new-product ideas List and define the steps in the new-product development process and the major considerations in managing this process Describe the stages of the product life cycle Describe how marketing strategies change during the product’s life cycle Discuss two additional product and services issues: socially responsible product decisions and international product and services marketing

BASIC MARKETING CONCEPTS Needs: Basic human requirements Examples- Food, water, and shelter Wants: Needs become wants when a person decided a specific item would satisfy a need. Examples- Specific food items and flavors of drinks Demand Willingness to buy Willingness to pay Ability to pay

BASIC MARKETING CONCEPTS Product- an offering that can satisfy a need or want Examples- goods, services, experiences, events, properties, and ideas Value- the ratio between what the customer gets and what he gives Value = Benefits ÷ Costs Benefits- functional and emotional in nature Costs- monetary, time, and energy related costs

BASIC MARKETING CONCEPTS Satisfaction- A person’s feelings of pleasure or displeasure resulting from comparing a product’s perceived performance to his or her expectations. Market- A group of buyers and sellers interested in negotiating the terms of purchase or sale of goods or services.

BASIC MARKETING CONCEPTS Marketing- An organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Marketing Management- The process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, services to create exchanges that satisfy individual and organizational goals.

BASIC MARKETING CONCEPTS Marketing Management: The process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals

BASIC MARKETING CONCEPTS Marketing can be described as an on-going process of: Discovering and translating consumer needs and desires into products and services Creating a demand for these products and services Serving the consumer demand with the help of marketing channels Expanding the market even in the face of keen competition

BASIC MARKETING CONCEPTS Marketing Mix Product Includes product variety, quality, design, features, brand name, packaging, warranties Price Includes list price, discounts and payment period 3. Place Includes distribution channels, coverage, locations, inventory 4. Promotion Includes advertising, public relations and direct marketing

New Product Development Strategies A firm can obtain new products through Acquisition Buying of a whole company, a patent or a license to produce a product owned by another person New product development Generating original products, product improvements, product modification, and new brands devised from the firm’s own research and development

New Product Development Strategies To create successful new products, the company must Understand its customers, markets and competitors Develop products that deliver superior value to customers Follow public policy and laws regarding developing products, patents, quality and safety

New Product development strategies New product development can be: Customer-centered Sequential Team-centered Systematic

Customer-centered development Focusing on finding new ways create more customer-satisfying experiences Begins and ends with solving customer problems

Sequential development Company departments work closely together individually to complete each stage of the process before passing it along to the next department or stage Increases control in risky or complex projects Slower than the other types of development

Team-based development Company departments form multiple cross-functional teams that overlap each other during the product development process to save time and increase effectiveness Team-based development can be more confusing and increase more tension than sequential Team-based development is also faster and more flexible than sequential

Systematic Development An innovative approach that collects, reviews, evaluates, and manages new product ideas Creates an innovation-oriented culture Yields a large number of new product ideas

Reasons for new Product failure Overestimation of market size Poor design Wrong timing Priced too high Ineffective promotion Management influence High development costs Competition

New product developing process Idea generation Idea screening Concept development and testing Marketing strategy development Business analysis Product development Test marketing Commercialization

Idea generation Sources of new product ideas Internal External New idea generation- the systematic search for new product ideas Sources of new product ideas Internal The company’s own formal research & development, management & staff, and entrepreneurial programs External Sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms

Idea screening Ideas screening- reviewing new product ideas in order to drop poor ones as soon as possible Criteria Market size Product price Development time and cost Manufacturing costs Rate of return

Concept development and testing Product idea- An idea for a possible product that the company can see itself offering to the marketing Product concept- A detailed version of the idea stated in meaningful consumer terms Product image- The way consumers perceive an actual or potential product Concept testing- Testing new product concepts with groups of target consumers

Market strategy development Market strategy development – the initial marketing strategy for introducing the product to the market Marketing Strategy Statement Part 1: Description of the target market Product positioning, sales, market share, and profit goals Part 2: Price, distribution, and marketing budget Part 3: Long term sales, profit goals, and marketing mix strategy

International product and service marketing If attempting to sell a product to an international market, companies need to be mindful about what they are selling and to whom. You will need to change your market strategy. Examples of challenges that arise Determining what products and services to introduce in which countries Whether your should standardize or customize your product to cater to the new area Packaging and labeling clearly Following customs, values and laws

Business Analysis Business analysis- the review of the sales, costs, and profits projections to find out whether they satisfy the company’s objectives

Product development Product development- involves the creation and testing of one or more physical versions by the R&D or engineering department Requires an increase in investment