Topic 7 - New Products And Brands (Part 2 - Products)

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This article is a topic within the subject Marketing Fundamentals.

Contents

Required Reading

Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 254-276.

New Products

[1] Rapid changes in tastes, technology & competition, prompt consumers to want new & improved products (causes life cycle). New Product Development is the development of original products, product modifications or new brands via own R&D (depends on buyer or sellers assessment). Newness can mean new to the world, new product lines, line extensions, improvements, repositioning & cost reductions. New Products can be obtained by Acquisition or New Product Development. 80% of new products fail/underperform. Reasons include – poor research (overestimation), poor design, incorrect positioning

The New Product Development Process

[2] MARK101271.jpg

  1. Idea Generation – the systematic search for new product ideas
    • Internal – employees, R&D team
    • External – customers, distributors, suppliers, competitors, shows, seminars
  2. Idea Screening – focusing on good ideas & dropping poor ones ASAP to avoid development costs (via rough estimations)
  3. Concept Development & Testing – translating ideas into product concepts
    • Product Concepts – detailed version of the idea stated in meaningful consumer terms
    • Product Image – the way consumers perceive actual or potential products
    • Concept Testing – testing new product concepts with a targeted consumers to discover if the concept has appeal
  4. Marketing Strategy Development – designing a new marketing strategy for a new product based on the product concept
    • Target Market, Value Proposition, Planned Sales/MKT Share/Profit Goals
  5. Business Analysis – a review of the sales, costs & profit projections to see if it satisfies firm objectives
  6. Product Development – converting the product concept into a physical product to check viability
  7. Test Marketing – implementation of the marketing program in 1 or more realistic market settings
  8. Commercialisation – introduction of the new product into the market place
    • When (further improvements, cannibalism?), where (which market – rollout), to whom & how, Costly

Managing New Product Development (NPD)

[3]

  • Customer Centred NPD – focused on new ways to solve customer problems & create more customer satisfying experiences
  • Team Based NPD – dept. work together in cross functional teams, overlapping steps in NPD process to save resources & increase effectiveness
    • Sequential NPD Process – (Above) helps bring control to complex/risky projects but can be slow (bottlenecks)
    • Team Based NPD Process – faster & effective, but can be confusing & bring tension (good for rapid change)
  • Systematic NPD – NPD process should be systematic & holistic to ensure new ideas are generated & good ones don’t falter, requires a good management system;
    • Innovation Management System – to collect, review, evaluate & manage new product ideas
      • Can encourage all stakeholders to be involved in generating new products

Common Organisational Arrangements

  • Product Managers - close to the market/knowledgeable but often preoccupied with existing products, may lack NPD skills
  • New Product Managers (NPM)– assigned the NPD task, may be to obsessed with modifications & line extensions
  • New Product Committeesspecialists from several functional areas to evaluate new product concepts & plans
  • New Product Departmentsseparate departments with line staff authority to develop new products, manager access to executives
  • New Product Venture Teamsspecialists from operating departments are assigned to a venture team

Product Life Cycle (PLC)

[4] The PLC can describe product classes (petrol cars) – longer life, product forms – standard PLC (SUV) & brands (Toyota)

  • New Product Development – finding & developing a new product idea
  • 0 Sales & high expenses,
  • Introduction – period of slow growth as the product is introduced
    • Slow sales growth, very high costs (commercialisation expenses & heavy promotion), no profits
    • Strategy is intended to position the product
    • Introduction Strategies
      • Price Skimming – generate high profits now to offset expenses
      • Price Penetration – build market share & create high profits later (after stabilisation)
  • Growth – period of rapid market acceptance & sales
    • High sales growth, lower costs per unit (spreading overhead), increasing profits, increasing competition
    • Growth Strategies - New Features, Improving Quality, Increasing Distribution, Entering New Market Segments
  • Maturity – slowdown in sales growth as the product achieves acceptance by most potential buyers. Longer stage.
    • Slow sales growth, profits level off or decline (if marketing expense to defend from many competitors)
    • Maturity Strategies – Modifying the target market to increase consumption, modify product (quality, feature, style or packaging) & modify the Marketing Mix (e.g. Price Promotion).
  • Decline – sales fall off & profits drop
    • Costs of managing & producing the product may exceed sales (low or no profits)
      • Strategies Harvest profits whilst competitors drop out by lowering costs, Divest

Product & Market Modification & Product Re-positioning Strategies can manage the PLC (aim to grow long term - renewal). Consumer product tend to have a shorter PLC than business products but there no exact time frame (depends on technology).

MARK101272.jpg [5]

End

This is the end of this topic. Click Marketing Fundamentals to go back to the main subject page for Marketing Fundamentals

References

Textbook refers to Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall.

  1. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp.254-256
  2. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp.256-267
  3. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp.267-268
  4. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp.269-273
  5. Mohammed Razzaque, UNSW
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