1. Marketing’s Role in New Product Development October 4, 2006 Agenda Why is marketing important? Product development costs and risks. Situation Analysis (Uncontrollable Variables): “YourWay” cereal. 10 Minute Break Marketing Strategy (Controllable Variables) Pepsi One’s product launch. New Product Development Video: IDEO develops a new shopping cart. Q&A: After class.

2. Marketing’s Role in New Product Development Prof. Bill Robinson Krannert School of Management Purdue University

3. Why is Marketing Important? Profits = Revenues – Costs Some Examples Advertising & personal selling. Product development. Pricing. Start your own business. Smarter shopper.

4. Why Will Our Discussion Focus on Consumer Goods, Like Soft Drinks and Breakfast Cereal? Why Will Our Discussion Focus on Consumer Goods, Like Soft Drinks and Breakfast Cereal? Easy to understand. Marketing principles apply to both high- tech and low-tech businesses.

5. Product Development Costs & Risks

6. “YourWay” Self-Serve Cereal Key Problems Key Opportunities Overall Situation Very Favorable? Somewhat Favorable? Neutral? Somewhat Unfavorable? Very Unfavorable?

7. Situation Analysis 1) Nature of Demand Unmet need? Unmet need? Health conscious consumers? Health conscious consumers? 2) Extent of Demand Huge market! Huge market! Breakeven market share of 1% -2%. Breakeven market share of 1% -2%. 3) Competition Kellogg’s, General Mills, etc. Kellogg’s, General Mills, etc. Supermarket bulk foods. Supermarket bulk foods. 4) Environmental Climate Political, economic, social, technological issues? Political, economic, social, technological issues?

8. Situation Analysis (cont.) 5) Product Life Cycle Difficult to enter a mature market. Difficult to enter a mature market. 6) Costs Higher costs versus competition. Higher costs versus competition. 7) Firm Skills Only Ed. Only Ed. 8) Financial Resources Only Ed. Only Ed. 9) Distribution Structure Is Payless ideal? Is Payless ideal? Floor space? Floor space?

9. Situation Analysis (cont.) Overall Situation Very Favorable? Somewhat Favorable? Neutral? Somewhat Unfavorable? Very Unfavorable?

10. Pepsi One Managerial Problem How to launch Pepsi One? Situation Analysis Key Problems: Key Opportunities: Overall Situation Very Favorable? Somewhat Favorable? Neutral? Somewhat Unfavorable? Very Unfavorable?

11. Pepsi One’s Marketing Strategy Target Market: Young men. Product Positioning: Only One has it all. Marketing Mix Product: Superior sweetener. Avoid word diet. Avoid word diet. Distribution: Priority versus Diet Pepsi? Promotion: $100 million launch. Trial Repeat Purchase Trial Repeat Purchase Price: Similar to other Pepsi products.

12. IDEO’s New Product Development Strengths?Weaknesses? Overall Evaluation?