MARKETING 410 THE DEVELOPMENT AND LAUNCH OF NEW PRODUCTS Day Two

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MARKETING 410THE DEVELOPMENT AND LAUNCH OF
NEW PRODUCTSDay Two
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DAY 2

• Last time
• The world of product development
• Two routes to new product-oriented jobs
• Big company via internal job track, ad agency,
  and/or graduate business degree
• Entrepreneurial via use of your business degree
  along with lots of other skills and people
• NPD requires a blend of
• Innovativeness / creativity
• Research rigor

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WHETHER YOU WORK FOR NIKE, COKE, MICROSOFT,
WALMART, OR YOURSELF
THE KEY TO DEVELOPING SUCCESSFUL NEW PRODUCTS
(AND SERVICES) IS THE
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• PRODUCTS THAT PROVIDE VALUE
• -
• -

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THEREFORE THE MARKETING RESEARCH BEHIND NEW
PRODUCTS HAS TO
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IDEA GENERATION IS BASED ON THOSE RESEARCH
CONCEPTS

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1. PRODUCTS TO SOLVE EXISTING PROBLEMS

• . every activity has problems and every
  problem has profit opportunities in helping
  people solve it
• getting up, getting clean, getting fed, paying
  the bills, feeding the dog, cleaning the house /
  yard,
• getting places, etc.

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2. PRODUCTS THAT HELP THEM ACHIEVE A DEEPLY
ROOTED GOAL
HOW MUCH WOULD YOU BE WILLING TO PAY FOR A
PRODUCT THAT WOULD MAKE YOU THE WORLDS BEST AT
SOME THING YOU REALLY WANT TO BE GOOD
AT? What is the net present value of that
product?
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OKAY - SO THE IDEA IS CRITICAL

• HOW (IN GENERAL) YOU ARE GOING TO SOLVE CERTAIN
  CONSUMERS PROBLEMS
• OR
• HOW (IN GENERAL) YOU ARE GOING TO IMPROVE THEIR
  ABILITY TO DO SOMETHING THEY WANT TO DO

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BUT IT ISNT JUST THE IDEA THAT MAKES YOUR
COMPANY (OR YOU) RICH. THE IDEA HAS TO BE TURNED
INTO A SOLUTION
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OTHER INPUTS TO VALUE

• Three other inputs to VALUE for new products
• the right _____, at the right ______, and at the
  right ______
• for the right target markets

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A GIVEN
THERE ARE FORCES THAT WILL MAKE YOUR COMPANY HAVE
TO DEVELOP STRATEGIES FOR PURPOSEFUL GROWTH
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• INTERNALLY GENERATED GROWTH OBJECTIVES
• -_________________________________________________
  _
• -_________________________________________________
  _
• GROWTH IS THE ONLY WAY TO GENERATE THOSE DOLLARS
  OVER THE LONG RUN
• YOUR STRATEGIC PLAN HAS TO REFLECT A COMMITMENT
  TO GROWTH

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• THERE WILL ALWAYS BE MORE COMPETITION IN THE
  FUTURE
• - direct
• - indirect
• - international
• New companies, new technologies, new industries,
  new activities, new lifestyles

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• SHIFTING MARKETS
• A. PEOPLE DEMAND NEW AND BETTER SOLUTIONS FOR
  THEIR PROBLEMS
• PEOPLE CHANGE

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4. THERE ARE INCREASED REGULATION COSTS,
ESPECIALLY NOW -- --
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5. YOUR EXISTING PRODUCTS WILL MOVE CLOSER TO THE
END OF THEIR PRODUCT LIFE CYCLES - for
technology products this can be VERY short - or
just market saturation . (from flow to
stock)
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Growth Options
THERE ARE FOUR BASIC APPROACHES TO PLANNING
COMPANY GROWTH EXISTING MARKETS NEW
MARKETS EXISTING PRODUCTS NEW PRODUCTS
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BOX ONE INCLUDES COST REDUCTION, BETTER
MANUFACTURING, BETTER SOURCING, DIFFERENT
CHANNELS,, ETC FOR EXISTING PRODUCTS mkt 411 /
mkt 422 IMPROVED MARKETING PROGRAMS, INNOVATIVE
PROMOTION, SMARTER PRICING, ETC FOR EXISTING
PRODUCTS. mkt444
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BOX 2 REPOSITIONINGS OF EXISTING PRODUCTS AND
TECHNOLOGY PUSH EVEN THE PUSH FOR NEW USES OF
A PROPRIETARY TECHNOLOGY INVOLVES DETAILED
PRODUCT RESEARCH
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• Box 3
• MAKING NEW PRODUCTS FOR THE
• SAME MARKETS AS YOUR OLD PRODUCTS
• BRAND IMPROVEMENT OR OUTRIGHT REPLACEMENT
• BETTER FORM BETTER INGREDIENTS
• BETTER COLORS BETTER PERFORMANCE ETC.
• Windows XP, plain-paper fax, newer Nike Running
  Shoes, Cell phones with more options, etc.
• BRAND EXTENSIONS / EXPANSIONS / FLANKERS
• creamy frozen yogurt, Bud Dry, Vanilla Coke, Blue
  Bell Chocolate Fudge Brownie ice cream, ETC.
• Different related products (Dockers, Saturn)

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• BOX 4
• NEW CATEGORIES OF PRODUCTS
• FOR NEW MARKETS
• New Category Entries
• Hewlett Packard-PCs Hallmark-gift items,
• Sears-Discover Card Nike-Hiking Shoes
• Mercedes - M-Class HP digital cameras
• New-to-the-World Products - INVENTIONS
• Polaroid camera, in-line skates, Kevlar,
• Palm, MP3, Voice Recognition Software

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NEW SUBTOPIC GOOD THINGS ABOUT GOING THE NEW
PRODUCTS ROUTE... 1.-- 2.
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3.-- 4.-- 5.
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SO NEW PRODUCTS ARE COOL.... BUT IT IS RISKY
TO RELY ON NEW PRODUCTS FOR GROWTH -- THERE
IS A VERY HIGH FAILURE RATE ON NEW PRODUCTS (35
TO 80 PERCENT, DEPENDING ON ESTIMATOR AND
INDUSTRY)
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ONE BIG FAILURE CAN REALLY HURT A
COMPANY -- MANY "SUCCESSFUL" NEW PRODUCTS
SIMPLY CANNIBALIZE THE FIRM'S OLD PRODUCTS
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• WHY DO NEW PRODUCTS FAIL?
• MARKET PLANNING
• MOST PLANNING FAILURES ARE BECAUSE FIRMS DO NOT
  UNDERSTAND THEIR MARKETS WELL ENOUGH TO FORECAST
  THEIR FUTURE.
• AND WHOSE JOB IS IT TO FIX THAT????

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EXAMPLES LOOKING IN THE WRONG PLACES FOR
GROWTH OPPORTUNITIES APPLYING THE WRONG
TECHNOLOGY TO A MARKETPLACE PROBLEM
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MISSING EVENTS IN THE ECONOMY OR SOCIETY WHICH
CHANGE THEIR MARKETS (THAT THEY SHOULD HAVE
FORESEEN) NEW REGULATIONS, CONSTRAINTS
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2. ORGANIZATIONAL PROBLEMS THE PRODUCT DEVELOPED
BY THE NEW PRODUCTS PEOPLE IS A POOR MATCH FOR
THE COMPANY -- NO EXPERTISE AT SELLING,
SERVICING, IMPROVING, ETC. COKE AND
COLUMBIA PICTURES QUAKER OATS AND SNAPPLE P G
AND OLESTRA SEARS AND ALLSTATE
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• DETAILS
• SOME FIRMS ARE ONLY COMFORTABLE WITH
  INNOVATIONS THAT USE THEIR EXISTING MARKETING OR
  MANUFACTURING INFRASTRUCTURE ...
• THERE IS SOME POWERFUL CHAMPION WHO JUST WON'T
  SAY NO... EVEN WHEN THE PRODUCT SUCKS TO START
  WITH
• THE CHANNELS OF DISTRIBUTION WON'T SUPPORT THE
  PRODUCT ....

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• 3. LOUSY MARKET ANALYSIS
• THE MARKET IS TOO SMALL
• POOR UNDERSTANDING OF CONSUMER NEEDS
• POOR FORECASTING OVERESTIMATION OF THE
  PRODUCT'S ABILITY TO PULL MARKET SHARE
• POOR INTERPRETATION BY MANAGEMENT OF THE DOZENS
  OF SCREENING TESTS

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• PROBLEMS WITH THE MARKETING MIX AND THE LAUNCH
• ? PRODUCT IS NOT NEW OR DIFFERENT ENOUGH
• ? POOR LOGISTICS, ADVERTISING, PRICING DECISIONS
• ? POOR TIMING OF LAUNCH
• ? POOR COORDINATION OF THE INTRO AND THE
  PROMOTION
• 5. PROBLEMS WITH MANUFACTURING

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THOSE THINGS OPEN UP THE DOOR FOR LOTS OF
FAILURES AND CONSIDERING THE INVESTMENT DEVOTED
TO CONSUMER RESEARCH, IDEATION, RD, ENGINEERING,
TESTING, AND TEST MARKETING FOR EACH OF THESE
FAILURES .... AND THE NUMBER OF PRODUCT IDEAS
THAT FAIL AT EACH OF THESE EARLY
STAGES... THAT'S A LOT OF MONEY TO HAVE TO COVER
WITH THE PRODUCTS THAT DO MAKE IT.
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NEW TOPIC DIFFERENT APPROACHES TO SUCCESSFUL NEW
PRODUCT DEVELOPMENT MANY COMPANIES DO AN
EXCELLENT JOB OF ONGOING NEW PRODUCT
DEVELOPMENT BUT THEY CERTAINLY DON'T HAVE TO DO
IT THE SAME WAY. MOST --- REACTIVE OTHERS
--- PROACTIVE
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REACTIVE NEW PRODUCTS ARE THEY SERVE
______________________ WITH PRODUCTS THAT SOLVE
SOME OF THE PROBLEMS WITH THE EXISTING SET OF
PRODUCT OFFERINGS. STRATEGIES 1. TIGHTER
TARGETING --
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SUBMARKETS
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• SECOND BUT BETTER
• 3. ME TOO, BUT CHEAPER

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THE KEY TO A REACTIVE PRODUCT DEVELOPMENT
STRATEGY IS
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IT IS APPROPRIATE WHEN 1. 2. 3. 4.
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• A PROACTIVE PRODUCT STRATEGY
• MAKING MARKETS
• A NEW MARKET IS CREATED WHEN A SET OF DIMENSIONS
  DEVELOPS TO DEFINE CUSTOMER WANTS AND NEEDS AND
  MARKET SEGMENTS
• 1. SOMETIMES THE FIRM DOES IT ON PURPOSE
• 2. SOMETIMES FOLLOWERS AND SECOND-BUT-BETTERS DO
  IT
• SOMETIMES IT JUST EVOLVES .

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SPECIFIC STRATEGIES FOR DEVELOPING STREAMS OF
PROACTIVE PRODUCTS
1. BRINGING WHOLE NEW TECHNOLOGIES TO MARKETS

• Personal Computers
• Microwave Ovens
• Photocopiers
• Pocket Calculators
• Fax Machines
• Birth Control Pills
• VCRs
• Communication satellites
• Bar coding
• Integrated Circuits
• Automatic Tellers

• Answering Machines
• Velcro
• Cell phones
• Laser Surgery
• Radar
• CD Roms
• Organ Transplants
• Fiber-Optics
• Disposable Diapers
• Software
• Magnetic Resonance Imaging

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TECHNOLOGY-BASED INNOVATIONS THAT ARE STILL
EVOLVING
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ANOTHER SOURCE OF PROACTIVE INNOVATIONS -- NOT
NECESSARILY DRIVEN BY TECHNOLOGY ... 2.
REDEFINING THE DIMENSIONS ALONG WHICH CONSUMERS
THINK ABOUT A PRODUCT CATEGORY
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• DEFINING NEW PROBLEMS THAT THE CONSUMERS REALLY
  DIDN'T KNOW THAT THEY HAD (WHILE SOLVING THEM)

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NOW... ABOUT PROACTIVE PRODUCTS AS A GOAL THE
RISKS ARE MUCH HIGHER FOR PROACTIVE
STRATEGY-CENTERED COMPANIES, BUT THE POTENTIAL
RETURN IS ALSO MUCH HIGHER.
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BUT --- ONLY IN SOME CASES IS A PROACTIVE
APPROACH A GOOD OPTION FOR A COMPANY
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WHICHEVER WAY A COMPANY DECIDES TO GO (REACTIVE
OR PROACTIVE) THERE IS A SPECIFIC PROCESS FOR
NEW PRODUCT DEVELOPMENT AND MARKETING THAT
IMPROVES THE PROSPECTS FOR A CONTINUING STREAM OF
SUCCESSFUL NEW PRODUCT INTRODUCTIONS