Bus-M300 1nd Edition Lecture 15 Outline of Current LectureI. New product definition from different perspectivesII. New product marketing emphasisIII. New product considerationsIV. 7 steps in product development process (NPDP)Current Lecture I. New product definition from different perspectivesa. Legal/Federal Trade Commission perspective: new is limited to 6 months after it enters regular distributionb. Company perspective: Anything different from previous one.c. Customers perspective: Degree of learning required in order to use the product properlyThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. New ProductsContinuous Innovation Dynamically Continuous InnovationDiscontinuous InnovationDefinition No new learning by customersDisrupts customer’s normal buying pattern but little new learning requiredRequires new learning and consumption patterns by customersExamples New flavors, packaging,and colorsElectric toothbrushes, DVDs, synthetic woodGPS, PCs, hybrid cars, smart phonesMarketing Emphasis Build customer awareness using same distribution channelsPromote points of difference between old and newEducate customers using promotion, personal selling, and trial.II. New product marketing emphasisIII. New product considerationsa. Which new product categories offer the greatest potential return on investment?The least?i. Discontinuous; continuousb. Which presents firms the greatest risk?i. Discontinuous (new category)c. Which is most common? Why?i. Continuous (least risky)d. About 8 out of every 10 new products fail. Why?i. Lack of competitive advantageii. Mismatch product with needs of consumer (poor segmentation strategy/product development issue)iii. Competition negates your actionsiv. Poor executionv. Lack of intereste. Why are new products important to firms?i. Diversified portfolioii. New product in PLCiii. Future growthiv. Financial performancev. Buyers pay more for newer productsvi. Build firm moralevii. Innovate vs. stagnantIV. 7 steps in product development process (NPDP)a. 1. Idea Generation: Many good ideas come from consumersi. Identify consumer needs and paii. Starting point for most research into solving consumer problems is wrongiii. Most customer research questions feature:1. How would you improve this product? Etc.2. They anchor them off of current products. Instead of talking aboutthe products, they should talk about the product category. b. 2. Screening: separate ideas from those that have no merit.i. Sophisticated firms screen projects, examining expected financials, competitive reactions, and ability to manage the new product over time.ii. Example: Frito-Lay – product must be forecasted to make 150 – 200 million before moving to the next stage. c. 3. Concept Development and Testing: Measurement of consumer attitudes and perceptions relevant to the producti. Example: If the price of this product were similar to that of a portable DVD player would you consider buying it?d. 4. Rough Marketing Strategyi. Target marketii. Price, distribution, promotion, and marketing budgetiii. Announcement of planned sales and profit figuresiv. Illustration of marketing mix strategye. 5. Development: a physical product now exists and company can analyze resultsi. Tests, revisions, and refinements occur before product is actually test marketed.f. 6. Test Marketing: Process of generalizing a specific geographical area to the product’s overall target marketi. Consumers evaluate and buy without knowing they are participating in the test market.ii. Sales are monitored during the test so company can estimate the product’s performance.iii. Test Marketing is: process of selecting a specific geographical are considered to be generalizable to the product overall target market1. Test marketing is expensive/time consuming2. Fallible – competitors can disrupt it3. Risky – competitors get a heads upV. 7. Commercialization: development of distribution channels chosen, promotion, pricing, sales force, and so on.a. Now 4P’s need to be implemented for producti. Promotionii. Pricingiii. Placeiv. ProductVI. Last Step: Measuring Successa. Salesb. Market sharec.