Categories of New Products

1
Categories of New Products
New-To-The-World
New Product Lines
Six Categories of New Products
Product Line Additions
Improvements/Revisions
Repositioned Products
Lower-Priced Products
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New Product Introductions

• New Formulation 47.1
• Positioning 39.1
• Packaging 8.6
• New Market 3.4
• Technology 1.1

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New Product Development Process
New Product Strategy
Idea Generation
Idea Screening
Business Analysis
Development
Test Marketing
Commercialization
New Product
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Why Some New Products Succeed
Failure Factors Poor match between product and
market needs Overestimation of market
size Incorrect positioning Inappropriate
price Inadequate distribution Poor promotion
Success Factors Good match between product and
market needs Adequate target market size Offers a
clear, meaningful benefit Distinguishable from
substitute products Offers unique, superior
value Organizational commitment to new product
development
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The Product Life Cycle
Introductory Stage
Growth Stage
Maturity Stage
Decline Stage
Product Category Sales
Dollars
Product Category Profits
0
Time
6
The Importance of New Products
New product 1 New product 2
Sales volume
Sales volume
Dollars
Profits
Profits

0

Time
7
Adopters Categories
ADOPTERS CATEGORIES BASED ON INNOVATIVENESS
Percentage of Adopters
Early Adopters 13.5
Late Majority 34
Early Majority 34
Laggards 16
Innovators 2.5
Time
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The Diffusion Process
Relationship of the Diffusion Process to
the Product Life Cycle
Introduction
Growth
Decline
Maturity
100 90 80 70 60 50 40 30 20 10 0
Product life cycle curve
Early majority
Cumulative Percentage of Adoption
Late majority
Early adopters
Innovators
Laggards
Diffusion curve
Time of Adoption of Innovations
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Rate of Adoption
Complexity
Compatibility
Characteristics Affecting New Product Diffusion
Relative Advantage
Observability
Trialability
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Unique Characteristics of Services
Intangibility
Characteristics That Distinguish Services
Inseparability
Heterogeneity
Perishability
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Core Supplementary Services for Federal Express
Advice and information
Problem solving
Order taking
Overnight transportation and delivery of packages
Billing statements
Supplies
Tracing
Pickup
Documentation
Source Adapted from Christopher H. Lovelock,
Services Marketing, 2nd Ed., (Englewood Cliffs,
NJ Prentice-Hall, 1991), p.18.
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Four Promotion Strategies for Services
Stressing Tangible Cues
Using Personal Information Sources
Common Strategies to Promote Services
Creating a Strong Organizational Image
Engaging in Postpurchase Communication
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Three Levels of Relationship Marketing
Potential for long-term advantage over
competitors
Degree of service customization
Main element of marketing mix
Type of bond
Level

One
Financial
Low
Price
Low
Personal communications
Two
Financial and social
Medium
Medium
High
Three
Financial, social, and structural
Medium to high
Service delivery
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Customer Value
)
(
Benefits
________
Customer Value

Perception of
Sacrifices
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Creating Customer Value
Offer products that perform Give customers
more than they expect Avoid unrealistic
pricing Give the buyer facts Offer
organization-wide commitment in service and
after-sales support
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The Customer Value Triad
Value-Based Prices
Goods Quality
Service Quality
Source Adapted from Earl Naumann, Creating
Customer Value (Cincinnati, OH Thomson
Executive Press, 1994), p. 17.
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Techniques of Quality Improvement
Quality Functional Deployment
Benchmarking
Essential TQM Techniques
Continuous Improvement
Reduced Cycle Time
Analysis of Process Problems
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Components of Service Quality
Reliability
Responsiveness
Components of Service Quality
Assurance
Empathy
Tangibles
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The Gap Model of Service Quality
Customer
Expected Service
(Gap 5)
Perceived Service
Service Delivery
Communication with Customers
Provider
(Gap 4)
(Gap 1)
(Gap 3)
Service Quality Specifications
(Gap 2)
Management Perceptions
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Economic Effects of Customer Loyalty
Lower Acquisition Costs
Base Profit
How Customer Loyalty Helps Companies
Revenue Growth
Cost Savings
Referrals
Price Premium
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Conventional/Traditional Distribution Channel for
Consumer Goods
Wholesaler
Retailer
The Consumer
Manufacturer
22
Distribution Channel for Consumer Goods with
Large Retailers
Wholesaler
Retailer
The Consumer
Manufacturer
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Direct Distribution Channel for Consumer Goods
Wholesaler
Retailer
The Consumer
Manufacturer
24
Indirect Distribution Channel for Business to
Business Goods
Industrial Distributor
User/OEM/
Manufacturer
25
Direct Distribution Channel for Business to
Business Goods
Industrial Distributor
User/OEM/
Manufacturer
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Elements of Successful Channels

• Pooled Resources
• team concept shared risk/reward
• Collective Goals
• often driven by a channel captain
• Connected System
• from demand forecast to end delivery/service
• Flexibility
• substitute players ability to survive changes

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Evolution of Marketing ConceptImplications for
Channels

• Production Era
• moving raw materials and product in the new
  industrial age was important catalyst
• Institutional Period (selling orientation)
• need to move the product (I.e., sell)
• Marketing Concept
• make what you can market too reactionary?
• Relationship Marketing
• highly interactive proactive mgmt of relations

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Channel Functions

• Contact Efficiency
• Routinization
• Sorting
• Categorizing
• Breaking Bulk
• Minimizing Uncertainty
• Need (intermediaries closer to market)
• Market (rapidly changing markets unclear
  sources)
• Transaction (timing reliability
• Each of these uncertainties diminishes over time
  as channel members develop standards,
  relationships, and norms

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Contact Efficiency
S S S S
Direct Only 12 transactions
B B B
S S S S
With 1 intermediary 7 transactions
I
B B B
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Types of Wholesalers
Possess Title Negot Promo

• Merchant Wholesalers Y Y Y Y
• independently owned
• Mfgrs Sales Orgs. N Y Y Y
• Producer-owned
• Agents/Brokers N N Y Y
• mfgrs reps, auction houses
• paid on commission
• Commission Merchants Y N Y Y

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How Retailers Create Value
- Right Merchandise - Good Shopping Atmosphere -
Decreased Shopping Risk - Convenience
Increases Customer Utility
Enhances Value
Reduces Price
- Control of Costs
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The Retail Mix

• Selling
• Service
• Store Design
• Location
• Merchandise
• Pricing
• Promotion

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Challenge of Retail Management
Overall Goal Create value for customers and
profit for firm
Marketing Objective Create differential advantage
Tasks Analyze changing environment Select target
market Coordinate ele- ments of retail mix
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The Margin-Turnover Tradeoff
Hi Margin Lo Turnover
High Low
Margin
Lo Margin Hi Turnover
Low High
Turnover
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Competition Among Strategic Groups
High
Prestige Stores
Traditional Dept. Stores
Merchandise Offering (quality, selection,
fashion, etc.)
Mass Merchandisers
Upscale Discounters
Low
Discounters
High
Low
Price
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Ways of Creating Differential Advantagewithin
Strategic Groups
Price
Atmosphere Service
Location