CHAPTER 5Product Lines DefinedVarious Business Product StrategiesConsumer Vs Business Product StrategiesImportance of Product PlanningTypes of New-Product ApproachesProduct Development and Strategy in Business MarketingPhases of New Product DevelopmentMarketing Activities at Each PhaseAlternative Approach to Product DevelopmentAlternative Approaches to Product Development (cont.)Slide 12New Product Commercialization: Common MistakesNew Product Commercialization (cont.)Slide 15Organization of the New Product EffortProduct Manager/ Marketing Manager RoleProduct Life Cycle ConceptPowerPoint PresentationSlide 20Slide 21Slide 22Experience CurveExperience Curve ConceptSuccess of Industrial ProductsFailure of Industrial ProductsDeterminants of the Product Mix in Business MarketStages in Adoption ProcessSlide 29Factors Influencing Rate of Adoption-DiffusionProduct Portfolio StrategiesSlide 32Slide 33Slide 34Slide 35Product Deletion StrategiesImportant Characteristics of Business ServicesImportant Characteristics of Business Services (cont.)Business Service Marketing: Challenges and OpportunitiesBusiness Service Marketing (cont.)CHAPTER 5NEW PRODUCT DEVELOPMENT, MANAGEMENT AND STRATEGYProduct Lines Defined•Proprietary or Catalog Products:•Standard product offerings inventoried for anticipation of sales orders.•Custom-Build Products:•Made for different variations according the specifications of customers.•Custom-Designed Products:•One-of-a-kind unit made for a small group of users.•Industrial Services:• Maintenance, repair or warranty.Various Business Product Strategies•Establishing product/service policies•Setting product service objectives•Searching out new products/services•Introducing new products/services•Modifying existing products/services•Dropping out old products/services•Packaging the products•Providing technical assistance/supportConsumer Vs Business Product Strategies•Product is important and low failure rate•Derived demand and less research•Buyer and user are not the same •Specifications are very important•Longer life cycle•Product support is very important•Packaging is less important•Unimportant aesthetic characteristicsImportance of Product Planning•Increased Competition:•Increased global and domestic competition.•Derived Demand:•understanding consumer needs and wants.•Increased Purchasing Sophistication:•Vendor analysis, value analysis and computer simulations.•Labor Saving Requirements:•Product planning to save labor costTypes of New-Product Approaches•Technology push•Once the perceived value of technology is great, technology push usually result. When the new product is developed, marketing function becomes important•Market pull•It is the result of market research and understanding the needs of users and development a new product to satisfy the needs. It caries the least business risk, because there is a chance that product will be sold.Product Development and Strategy in Business Marketing•It is engineering responsibility.•Marketing and sales personnel are frequently called on new product.•It is the lifeblood of the industry; therefore, firms should spent time and effort to developing new product.•However, it is a risky endeavor for every industrial firm.Phases of New Product DevelopmentIdea and concept generationScreening and evaluationBusiness analysisProduct developmentProduct testingProduct commercialization and introductionMarketing Activities at Each Phase•Idea and concept generation: •Involves the search for product ideas and concepts that meet company objectives.•Screening and evaluation:• Involves analysis to determine which ideas submitted are pertinent and merit a more detailed study of potential feasibility and market acceptance.•Business analysis: •Return-on-investment criteria are examined along with competition and the potential for market entry.•Product development:•Involves taking the product from an idea generated during a brainstorming session to a state of readiness for product and market testing.•Product testing:•Involves conducting commercial experiments necessary to verify earlier business judgments.•Product commercialization and introduction:•Includes launching the new product through full-scale production and sales and committing the company's reputation and resources to the product's success.Alternative Approach to Product Development•Initial Screening•go or no go decision•Preliminary market assessment•quick and dirty situation analysis•Preliminary technical assessment•technical evaluation of new product idea•Detailed market study•marketing research, focus group interviewsAlternative Approaches to Product Development (cont.)•Preliminary business analysis•net present value, profit expectations•Product development•Alpha test•testing in house•Beta test•testing the product in customer’s business•Test market•selling the product in test citiesAlternative Approaches to Product Development (cont.)•Trial production•limited production to prove production facilities•Final business plan•financial analysis before commercialization•Production ramp up•Full scale production•Market launch•implementation comprehensive marketing planNew Product Commercialization: Common Mistakes•When the development risks are high and the opportunity cost are low, it is not particularly advantageous to accelerate product development.•When the development risk is low and opportunity costs are high, it is absolutely important to speed up the process.New Product Commercialization (cont.)•The most challenging situation is that when opportunity costs and development risks are both high.•Breakthrough inventions:•It is an idea that is so different that it can not be compared to any existing practice or perception.•Incremental innovations:•This is continuation of existing method or practice.New Product Commercialization (cont.)•Mistake No.1:•Lack of sensitivity to the differences in the management tasks required of incremental Vs. breakthrough projects.•Mistake No.2:•Tendency to assume that breakthrough projects need financial support from top management and incremental need only backpacking.•Mistake No.3:•Managers already handle a portfolio of products through existing manufacturing/sales system, it makes sense to adopt the same for the new product. However, new customers have different buying habits;