1. Session Developing and Managing Products

2. Session Outline New Product development Product Life-cycle Innovation Rate of Adoption

3. This Session Weekly Activity: Customer Profiles Undertake the on-line VALS Survey at http://www.strategicbusinessinsights.com/vals/presurvey.shtml and compare your results to that of the values segments at Roy Morgan research How does this compare to the Australia Post Australian Lifestyle survey? Check out the: https://www.lifestylesurvey.com.au/ website. https://www.lifestylesurvey.com.au/

4. What is a ‘new’ product? Products that are truly innovative. Eg cure for cancer. Products which have no existing substitutes. Innovative replacements for existing products. Product is significantly different from existing products. Eg Digital HDTV. Imitative products that are new to a particular company. Imitation products new to that company,not to the market.

5. New products New products are the lifeblood of an organisation. New products are introduced for a number of reasons; to expand the marketing mix to exploit marketing opportunities to improve profitability.

6. New products Even though they are important, 60 - 70% of all new products fail during their first two years. To be successful, new products need to offer customers an advantage over the current offerings.

7. New Products Continuum

8. New product success factors Added price performance Advantages to consumers Efficient development processes Adequate development and promotional funding Well directed market launches Well qualified marketing management.

9. New product failure factors Technical difficulties that go undetected during development Target market too small Poor match between the company in either marketing skills, finance and/or technical expertise Bad timing Competitor influence.

10. Development process The new product development process consists of seven steps. These are; new product strategy exploration screening business analysis development test-marketing commercialisation The new product development process can take anywhere from a number of months to a number of years.

11. Product Development Stages

12. Adding a new product! Is there DEMAND for the product? Is there a FINANCIAL fit for the firm? Will it create environmental issues? What is the present marketing STRUCTURE?

13. Product Development Steps

14. New product strategy Integration of the marketing strategy to allow for a focus on the generation and development of new product ideas. Should have set objectives to provide guidance as to the source of new product ideas and to ensure a balance of new concepts and modifications of existing products. Should also consider the related budgeting issues.

15. New product strategy Defending market share position. Maintaining companie’s position as a product innovator. Maintaining a specific R.O.I. Goal. Establishing a position in a new market.

16. Exploration Some of the ways that ideas can be generated include; brainstorming focus groups research and development consumers sales people competitors.

17. Idea generation Sources of new-product ideas: customers employees distributors competitors research and development consultants creative thinking.

18. New Product Idea Sources

19. Screening Once the ideas have been generated, then they need to be screened to find those worth pursuing. Ideas that do not measure up are discarded. Two types of decision errors that can occur in this stage of the process. These are; drop errors - discarding a good idea go errors - keeping a poor idea. A formalised process helps reduce these errors.

20. Business analysis Products that come through the screening process need to be evaluated to determine their financial viability. This is a dollars and cents analysis of the product in terms of expected sales, costs and investment requirements. Techniques that are used at this stage include, discounted cash flows, return on investment and sales and market forecasts.

21. Development At this stage only good ideas that appear to be profitable will remain. In order to be able to test the products the idea needs to be refined and often a model or prototype of the product is developed. Three types of development occur at this stage; concept development prototype development marketing strategy development.

22. Development Concept development is where the basic idea for the new product is refined by listing its attributes. These concepts or attributes are then tested with a small group of potential buyers for comment and feedback.

23. Development Prototype development is where a model or sample of the product is made so that there are physical and tangible examples for further testing. This type of development also allows for more accurate estimates of production costs and processes.

24. Development Marketing strategy development is where the marketing strategies that are required to sell the product are determined. Marketing research with potential consumers and suppliers of the product is conducted to assist the process and to ensure all needs are considered.

25. Test marketing This is the introduction of the new product into a limited number of representative communities to assess potential product demand and the marketing mix. This stage allows the firm to test different marketing approaches. Some firms choose not to test market if there is insufficient time, likely competitor reaction or if it is too expensive. Test marketing is rarely conducted for industrial products.

26. Test marketing There are some problems with test marketing. These are; obtaining a representative community translating national media campaigns into local ones estimating the likely competitive influences ascertaining and controlling extraneous factors.

27. Choosing a test market Similar to planned distribution Relative isolation and free of influences Advertising availability; multiple media Diversified cross-section No atypical purchase habits Representative population/income Not overly used or easily ‘jammed’ Year-round sales stability Available research/audit and retailers

28. Alternatives to test marketing Single-source research using supermarket scanner data Simulated (laboratory) market testing

29. Commercialisation This is the last step in the process and is where the product is produced to full scale quantities, the promotional campaign is instigated and the product is launched into the marketplace. Companies often use tools such as PERT and CPM to assist with the management of this stage of the process.

30. Development Time

31. New product development process Three methods that companies can employ to organise the new product development process. These are; new product committee new product department new product venture team.

32. N EW-PRODUCT ADOPTION AND DIFFUSION Adoption process: A set of successive decisions an individual or organisation makes before accepting an innovation. Stages in Adoption Process: Awareness  Interest  Evaluation  Trial  Adoption  Post-adoption confirmation. Diffusion: The process by which an innovation is spread through a social system over time.

33. The adoption process The process used by consumers to adopt new products is known as the adoption process. An understanding of this helps marketers of new products increase the chances of success. There are five stages that consumers pass through in deciding to adopt new products. These are; awareness, knowledge, evaluation, trial and adoption.

34. Adoption Process Stages

35. The adoption process The time and rate of adoption will vary according to; the type of product and its characteristics the consumers characteristics the prevailing economic conditions the marketing strategies used to communicate the new product information.

36. Customer characteristics Patterns of adoption behaviour in consumers can be illustrated by a bell shaped curve, which is further segmented into five groupings that together represent the entire population. These are; innovators - first 2.5% of the population early adopters - next 13.5% early majority - next 34% later majority - next 34% laggards - last 16%.

37. A DOPTER CATEGORIES Researchers have identified five categories of individual adopters for new products: Innovators — 3% of the market. Early adopters — 13% of market. Early majority — 34% of market. Late majority — 34% of market. Laggards — 16% of market. non-adopters never accept the innovation.

38. Rate of Adoption Curve

39. Customer characteristics Innovators are the first to adopt new products. They have above average incomes, are well educated, are self-confident and do not rely on group information. Early adopters are more reliant on group norms and values and are most likely to be opinion leaders. Early majority rely on group information and they are an important link in the diffusion process because of this. Late majority relies heavily on group norms and adoption for them is part of a need to conform. They tend to be older, have below average incomes and education. Laggards have the lowest socio-economic status and are suspicious of new products and ideas.

40. Product characteristics Some products reach adoption more easily than others. There are five characteristics that are likely to affect the rate of adoption. The more a product has these the faster adoption is likely to be. They are; relative advantage compatibility observability simplicity trialability

41. Marketing implications of the adoption process Communication aids the diffusion process Word-of-mouth Direct from marketer

42. Product life cycle A concept that provides a way to trace the stages of a product’s acceptance, from its introduction (birth) to its decline (death).

43. Style A basic and distinctive mode of expression.

44. Fashion A currently accepted or popular style in a given field.

45. Fads Fashions that enter the market quickly, are adopted with great zeal, peak early and decline very fast.

46. Styles, Fashions & Fads

47. Product life cycle The course of a product’s sales and profits over its lifetime. It involves five distinct stages: product development introduction growth maturity decline

48. The product life-cycle Dollars Time in years Loss 0 Profit Sales Volume INTRODUCTIONGROWTHMATURITYDECLINE

49. The product life cycle Definition—The stages that a product moves through from its introduction to the market to the disappearance from the market. Used for product planning Product’s profit & sales. The four stages of the P.L.C.

50. Introductory stage Full-scale launch of new products High failure rates Little competition Frequent product modification Limited distribution High advertising, marketing and production costs Negative or non-existent profits Promotion focuses on creating awareness and information Intensive personal selling to channels The most critical stage

51. Growth stage Increasing rate of sales Entrance of competitors Market consolidation Initial increasing healthy profits Promotion emphasises brand ads Goal is wider/increased distribution Prices normally fall Development costs are recovered Trial of the product

52. Maturity stage Sales increase at an decreasing rate Declining sales growth Saturated markets Extending product line Stylistic product changes Heavy persuasive promotions to dealers and consumers Marginal competitors drop out Prices and profits fall due to competition Niche marketers emerge Prospect of saturation of competition

53. Decline stage A long run drop in sales Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses New products replace old Sales and profits decline Products withdrawn from the market

54. Planned obsolescence The objective is to make an existing product out of date, and thus increase the market for replacement products. Some firms plan obsolescence as part of the strategic marketing plan.

55. Diffusion process and plc Innovators Early adopters Early majority Late majority Laggards Product life cycle curve Diffusioncurve IntroductionGrowthMaturityDecline Sales

56. Next Session Weekly Activity: Industry Trade Missions Identify the industry you seek a trade mission in: Tourism Education Industry of interest Find a trade event calendar website for your selected industry, ie: www.tradeevents.australia.com (Tourism)www.tradeevents.australia.com Visit the website and determine there are any trade missions going to your country of interest Comment on the value of such trade missions Word Count: 200 - 300