New Product Development Process (Unit 2)

 

New Product Development

 

New Product Development Process consists of the following eight major steps.

1.       Idea Generation

2.       Screening

3.       Concept Development & Testing

4.       Marketing strategy

5.       Business Analysis

6.       Product Development

7.       Test marketing

8.       Commercialization

 

1  Idea Generation

Major sources of Idea generation are – Internal sources, Customers, Competitors, Distributors, Suppliers. Other sources can be trade magazines, shows, seminars, consultants, Ad agencies, universities and brain storming.

 

2  Idea Screening

It is screening new product ideas in order to spot good ideas and drop poor ones.

Have a rough idea about market size, market growth, market positioning

 

3  Concept Development & Testing

A Product Idea is an idea for a possible product that the company can envision offering to the market.

A Product Concept is a detailed version of the new product idea stated in meaningful consumer terms.

A Product Image is the way consumers. perceive an actual or potential product.

Concept Development

Customers do not buy a product idea, they buy a product concept.

Concept Testing

Concept testing is testing new product concepts with a group of target consumers to find out if the concepts have strong Consumer appeal.

 

 

4  Marketing. Strategy Development

•Marketing Strategy Development is designing an initial marketing strategy for a new product based on product concept.

• Marketing Strategy statement is a statement of the planned strategy for a new product that outlines the intent target market, the planned product positioning, plus the sales, market share and profit goals for the first few years.

* Marketing Strategy Statement consists of three parts

1. The first part describes the target market, the planned product positioning and the sales, market share and profit goals for the first few years.

2. The second part outlines the products planned price, distribution and marketing budget for the first year.

3. The third part of the marketing strategy statement describes the planned long run. sales, profit goals and marketing-mix strategy.

 

 

5  Business Analysis

• Business Analysis is a review of the sales, costs and profit projections for a new product to find out whether these factors satisfy the company objective

• If they do the product can move to the product development stage.

• This is done by looking at the sales & history of similar products, survey of market opinion etc.

 

 

6  Product Development

• Product development is developing the product concept into a physical product in order to assure that the product idea can turned intobe workable product.

It calls for lage jump in investment.

Developing it may take days, weeks, month or even years

• The prototypes must have required functional features and also convey intended psychological characteristics. 

 Previously the goal was to produce customer satisfying products and without much concern about how the designs will be produced, which was left to manufacturing department. Recently companies have adopted a new approach called called design for manufacturing and assembly (DFMA). Using this approach companies work to fashion products that are both satisfying to consumers and easy to manufacture.

 

 

7  Test Marketing

 

•Text Marketing is the stage of new-product development in which the product and marketing programe are tested in more realistic market setting.

Test marketing allows the company to test its entire marketing program for the product - its portioning strategy, advertising distribution, pricing, branding & packaging.

• Test marketing is used to find potential problems of consumers and dealers while handling, using and repurchasing the product.

• When cost of developing and introducing the product are low and the company is confident that the product will succeed or the product is a minor modification of current product the company may do little or no test marketing.

 Test marketing takes time during which competitor may gain advantage.

 

•Consumer product companies usually choose one of the three approaches to test Marketing 

 1 Standard test market 

2 Controlled test market 

3 Simulated test market 

 

Standard Test Market

• Standard test markets test the new consumer product in situations like those it would a face in a full scale launch. A few test cities are found where Salesforce tries to persuade resellers to give shelf space and promotional support. The product is backed by full advertising and promotion campaign and the product performance is measured. The results are used to forecast national sales and profits.

• Standard test Markets take a long time to complete, it is costly, competitors know it even before it launch, and get time to develop defensive strategies.

 

Controlled Test Market

Several research firms keep controlled panel of stores which carry new products for free. The research firms delivers the product to the participating store and controls shelf location, space, displays and point of purchase promotions and pricing.

 

Simulated Test Markets

The consumers are given some a small amount of money and invited to a real or laboratory store where they buy items. 

 • The process is a test of commercial effectiveness.

Some weeks later the consumers are interviewed by phone to determine product attitudes, usage satifaction de repurchase intentions

 

 

8  Commercialization 

Commercialization is introducing a new product into the market.

The company takes decisions on when, where, to whom and how to inter the market.

Marketing: Segmenting-Targeting-Positioning & Identification and Managing Competition (Unit 2)

Market Segmentation 

Market segmentation : Buyers have unique needs and wants & each is potentially a separate market but designing a separate marketing program for each buyer is not worth while. Marketers look for broad classes of buyers who differ in their product needs or buying responses.

What is Market Segmentation?

Market Segmentation is dividing market into smaller groups of buyers based on their unique needs, behaviours or personality.

Advantages of Market Segmentation.

Distinguish one customer group from another.

Understand Potential Customers.

Pay Proper attention to them.

Formulate Maketing Programmes & Marketing Mix.

Select channels of distribution.

Understand Competition

Efficient use of marketing resources

Accurate measurement of goals & performance.

Facilitate proper choice of target market.

Helps achieve specialization.

Helps spot the less satisfied segments and succeed in satisfying them.

Market Segments require separate products, have unique needs and wants, have unique responses and behaviour, 

Requirements for Effective Segmentation.

To be useful, market segments must have the following characteristics.

1. Measurability - The degree to which the size and purchasing power of the segment can be measured.

2. Accessibility - The degree to which the segments can be reached and served.

3. Substantiality - The degree to which segments are large and profitable enough.

4. Actionability The degree to which affective. programs can be designed for attracting and serving the segments.

5. Growing

6. Compatible with present policies.

7. Profitable.

Bases of Segmenting Consumer Markets.

Geographic: North, s, e, w, region, city, density of population, climate .

Demographic: age, family size, family life cycle, gender, income, occupation, religion, social class.

Psychographic: life-style, personallity, Activities, Interests, Opinions. 

Behavioral

Occasions: regular, special

Benefits: quality, economy, features

User status: non-user, ex- user, potential user, first time user, regular user.

User Rate: light, medium, heavy

Loyalty Status: none, medium, strong, absolute, 

Readiness Stage: unaware, aware, informed, interested, desirous, intending to buy

Attitude : enthusiastic, positive, indifferent, negetive, hostile.

Market Targeting

Market targeting requires to 

1. evaluate the market segments and 

2. selecting one or more of them.

 1 Evaluating Market segments

 In evaluating different market segments, a firm must look at three factors: 

1. segment size and growth 

2. segment structural attractiveness and 

3. company objectives and resources.

 -Segment Size and Growth

 

company must collect data on current sales, projected sales, growth rates cand expected profit margins for various segments.

It must select the segment appropriate in size and growth for the company.

Large and fast growing segments are not always the most atractive for every company.

Smaller companies with lack of skill and resources may find smaller segment more profitable.

 

-Segment Structural Attractiveness

The company must examine several major structural factors

1. The impact of potential competitors.

2. The threat of substitute products.

3. The relative power of buyers. If the buyers possess strong bargaining power they will force the price down or demand more service at the expense of profitability. 

4. The relative power of suppliers. Suppliers may raise prices or reduce Quality or quantity of goods or services.

 

-Company Objectives & Resources

Some attractive segments can be dismissed if they are not in line with company's long run objectives.

Even if the company has required strength it must have superior resources if it wants to win.

 

 2 Selecting Market Segments

 After evaluating different segments, a company hopes to find One on more market segments worth entering.

 A Target Market consists of a set of buyers sharing common needs or characteristics that the company decides to serve.

 

• The firm can adopt three market coverage strategies. 

1. undifferentiated marketing

2. differentiated marketing.

3. concentrated marketing.

 

-Undifferentiated Marketing 

• Undifferentiated Marketing is market -coverage strategy in which a a firm decides to ignore market segment differences and go after the whole market with one market offer.

It focuses on what is common in the needs. of consumers rather than what is different.

It provides cost economies, low inventory, low transportation cost, low marketing research cost, low advertising cost, low marketing. cost and product management cost.

 

-Differentiated Marketing

• Differentiated marketing is a market coverage strategy in which a firm decides to target several market segments and design separate offers for each. 

-Concentrated Marketing

Concentrated Marketing is a market-coverage strategy in which a firm goes after a large share of one or a few sub-markets. The firm concentrating on a segment, market or product.

Another way of describing market coverage strategy is 

Single segment concentration

Selective specialisation

Product specification 

Market specialization 

Full market coverage strategy.

 

 Choosing A Market-Coverage Strategy

Many factors that must be considered when choosing a market-coverage strategy are -

• Company resources - if limited concentrated marketing makes sense.

•Product variability-

•Products stage in the life cycle - For a new product, undifferentiated marketing or concentrated marketing makes most sense.

Market variability - If most buyers have same taste differentiated marketing is appropriate.

Competitor's Marketing Strategies - when competitors use segmentation undifferentiated marketing can not be used.

 

Positioning Strategies

 The following broad positioning strategies are available to the marketer.

1  Product attributes: Based on some special feature or service.

2  Benefits : Based on some special benefit to the consumer.

3  Usage occasions : The product is to be used in special occasions.

4  Users of certain class :The product is for users of specific class.

5  Against a competitor : Providing same benefit as the competitor.

6  Away from competitor : Providing benefits different from the competitor.

 

 

Choosing and implementing a positioning strategy

Positioning consists of three steps. 

1.    Identifying a set of possible competitive advantage.

2.      Selecting the right set of competitive advantages.

3.      Effectively communicating and delivering the chosen position to the market.

 

1 Identifying a set of possible competitive advantage

Competitive Advantage is an advantage over competitor gained by offering consumers greater value, either through lower prices or by providing greater value by providing more benefits that justify higher prices.

 

Positioning consists of differentiating the offer and delivering the promised quality or service.

A company can differentiate the offer on the following lines.

 

·         Product differentiation: …

·         Service differentiation ….

·         Personnel differentiation …

·         Image differentiation ….

 

  

2 Selecting the Right Competitive Advantage

How many differences to promote? This answer can be solved by understand the following

·         Understanding the USP

·         Mistake of under positioning

·         Mistake of over positioning

·         Mistake of confused positioning

 

 

 

Which differences to promote?

Only those differences must be promoted which are- 

·         Important

·         Distinctive

·         Superior

·         Communicable

·         Preemptive

·         Affordable

·         Profitable

 

 

3 Communicating & Delivering the Right Chosen Position

 

This is done by designing the marketing mix of four Ps.

Identification and Managing Competition

• Under marketing concept, companies succeed by designing offers that satisfy target consumers' needs better than competitors' offers.

• Thus marketing strategies must consider not only the needs of target consumers, but also the strategies of competitors which require two steps 

1 competitor analysis and

2 compititive strategies.

1  Competitor Analysis

Competitor Analysis is the process of identifying. major competitors; assessing their objectives, shategies, stengths and weaknesses and reaction patterns; and selecting which competitors to attack or avoid

Competitive strategies are the strategies that strongly position the company against competitors and that give the company the strongest possible strategic advantage.

Competitor Analysis

• Steps in analysing competitors are

1. Identifying the company's competitors. 

2. Determining competitors objectives.

3. Identify competitors' strategies.

4. Assessing competitors' strengths and weaknesses. 

5. Estimating competitors' reaction patterns

6. selecting competitors to attack and to avoid.

___________________________

1. Identifying the company's competitors. 

Industry point of view - Those who are part of the present industry.

Market point of view - Those who can become part of industry in future.

2. Determining competitors objectives.

What do the competitors short term and long term objectives? Profitability, Market share, growth, cash flow, Technology leadership, and other goals 

3. Identify competitors' strategies.

Competitor's product, quality, features, mix, customer service, pricing policies, distribution coverage, sales strategy, advertising, sales promotion , R&D, manufacturing, purchasing, and other strategies.

4. Assessing competitors' strengths and weaknesses. 

Using secondary data, personal experience and hearsay.

Conducting 'Costomer Value Analysis ' to know what benefits customers Value and how they rate various customer offers.

5. Estimating competitors' reaction patterns

Understand the customers' philosophy, internal culture, and guiding beliefs. Do they live in harmony or fight constantly.

6. selecting competitors to attack and to avoid

Close or distant 

Strong or weak 

Well behaved or disruptive.

2   Competitive Strategies 

Michael Porter has described four basic competitive Strategies.

1. Overall cost leadership 

2. Differentiation 

3. Focus 

4. Middle of the roaders

A different classification of competitive positions can be adopted based the roles firms play in the target market.

# Market Leader Strategies 

1. Expanding the total market - new users, new usage, more usage 

2. Protecting the market share. - position defense, franking defense, preemptive defense, counter offensive defence, mobile defense (market diversification), contraction defense.

3. Expanding the market share - gain more share 

# Market Challenger Strategies 

1. Concentrate on its strength 

2. Attack competitors' weakness - frontal attack, flanking attack, encirclement attack, bypass attack (target easier Markets), guerrilla attack (periodic attack to harass and demoralise the competitor)

3.Bypass and develop new product and new market.

# Market Follower Strategy 

1. Cloner- copies everything product, distribution, advertising etc.

2. Imitator - copies with some differentiation.

3. Adapter- builds on leaders products but improves on them.

# Market Nicher Strategies 

Vertical Level Specialist(A niche specialist eg healthcare, education), customer size specialist, geographic specialist, feature specialist.

Marketing Introduction

         

Contents 

·        Marketing Introduction ·        Definition of Marketing ·        Nature of Marketing ·        Scope of Marketing ·        Importance / Role of Marketing ·        Marketing Management Philosophies / Concepts ·        Marketing Myopia ·        Trends in Marketing ·        Challenges of Marketing ·        Value Chain Creation

Marketing Introduction

Business = Marketing

Marketing is the truly entrepreneurial part of business

Marketing is the truly strategic part of the business.

Marketing is an art, a science, a system, a process, a relationship.

Marketing is meeting human needs or meeting customer needs.

Marketing answers the following questions. Who are our customer? What must we do to meet their needs? How to meet their needs at a profit?

Marketing adds value to the goods by providing 

1. Time utility: distribution, storage and timely distribution

2. Place utility: sorting and grading

3. Possession utility: cash & credit facility, transfer of ownership.

4. Form utility: raw material to finished goods

5. Person utility: establish contact

Definition of Marketing

Marketing is the performance of business activities that direct the flow of goods and services from the producer to the consumers.

Marketing is a the human activity directed at satisfyingneeds and wants through an exchange process. (Kotler 1980)

Marketing is a social and managerial process by which individuals and groups obtain what they want and need through creating, offering and exchanging products of value with others.(Kotler 1991)

Definition of Marketing Management

marketing Management is the analysis, planning, implementation and control of programs designed to create, build, and maintain beneficial exchanges with target buyers for the purpose of achieving organisational objectives.

Nature of Marketing

The main features of modern marketing are

1. Marketing is Consumer Oriented.

2. Marketing starts and ends with the consumer-

3. Marketing precedes and succeeds production 

4. Modern Marketing is the guiding element of business.

5. Marketing is a science as well as an art.

6. Marketing is a system. (Input - process - output)

7. Exchange Process is the essence of marketing

8. Marketing is goal-oriented. - profits, sales, market shares, satisfaction, distibution of scarce resources, future course of action.

9. Marketing is a dynamic process.

Scope of Marketing

1. Product Policy on Planning

(a) Marketing Research

Udentifying the customer requirements

collection of data

Analysis of data 

Findings and conclusion.

(b) Motivation Research

Motivating Consumers through advertising & promotion.

(C) Test Marketing 

Testing products in Standard markets, simulated markets and geographical area.

2. Distribution.

Organising distribution through various channels manufacturer to wholesaler to retailer to consumer.

Transportation

Warehousing

3 Sales Planning 

Setting various sales target. 

Setting the various budgets.

4. Sales Management

Recruitment of sales staff,

Training and development of sales staff

Incentives and renumeration of sales staff

Motivation of sales staff.

5. Segmenting and targetting the customers and 

developing marketing mix.

Importance / Role of Marketing

Globally

Firms growing frem national to global

Trade agreements between countries to do business

Relation between countries based on business.

Domestically:

High standard of living

Choice to customers

Employment Generation in retail, wholesaling, transportation, ware housing, communication departments, marketing of agricultural goods, industries etc.

Marketing creates utilities

Form Utility:

Place Utility:

Tine Utility:

Information Utility

 Possession Utility

Organisationally

Only department producing revenue directly.

In Service Marketing companies every staff has to be customer oriented.

Not for profit organisations also use marketing.

Personally

We are part of the marketing plan for many organisations.

Vast assortment of goods made available close to homes, ease of purchase, media is vastly supported by advertising.

Better informed customer.

Marketing Management Philosophies / Concepts

There are five alternative concepts under which organizations conduct than marketing activities.

1. Production

2. Product

3. Selling

4. Marketing

5. Societal Marketing

* Production Concept

The production concept holds that consumers favor products that are available, and highly affordable and management should focus on improving production and distribution.

The production concept is useful in two situations.

1. Demand for a product exceeds the supply. Management looks for ways to improve production.

2. Product's cost is too high and improved. productivity is needed to bring it down.

* Product Concept

Product concept holds that consumers favor products that offer the most and features, quality and performance and that organisation should make continuous product improvements.

* Selling Concept

The selling concept holds that consumers will not buy enough of the organisations products unless the organization undertakes a large-scale selling and promotion effort. 

* Marketing Concept 

The marketing concept holds that achieving organizational goal depends on determining the needs and wants of target markets and delivering the desired satisfaction more effectively and efficiently than competitors.

* Societal Marketing Concept 

The societal marketing concept holds that the organization should determine the needs, wants and interests of target markets and deliver the desired satisfactions more effectively and efficiently than competitors in a way that maintains or improves the consumers and society's well being.

 The societal marketing concept calls upon marketers to balance three consideration in setting their marketing policies.

1. Society (Human Welfare)

2. Consumer (Satisfaction)

3. Company (profits)

* Holistic Marketing Concept

Holistic Marketing recognises that "every thing matters. The four components of holistic marketing are relationship marketing integrated marketing, internal marketing, and socially responsible marketing.

1 Relationship Marketing: Relationship marketing has the aim of building mutually satisfying long-term relationships with key parties - customers, suppliers, distributors and other marketing partners. Companies build strong economic technical and social ties among the parties. The companies need to do Customer relationship management (CRM) and partner relationship management (PRM). The outcome of relationship is building of a unique company asset called marketing network consisting of customers, retailers marketing intermediaries, employees, ad agencies, university scientist, and others. It requires an understanding of the capabilities and resources of different groups, as well as their needs, goals, and desires.

2. Integrated Marketing: 

Marketing program consists of numerous decisions on value-enhancing marketing activities generally called marketing mix. Marketing mix is also defined as the set of marketing tools the firm uses to pursue its marketing objectives. These are classified into four - product, price, place and promotion.

3. Internal Marketing 

It is taking the employees along to reach company objectives. Designing appropriate programs to motivate them is important.

4. Socially Responsible Marketing 

It was explained earlier.

Marketing Myopia

Marketing myopia is a business strategy that focuses on short-term sales instead of long-term growth. It can lead to missed opportunities, reduced performance, and business failure.

Production concept, product concept, and selling concept are myopic as they do not concentrate on customer needs. By following marketing concept and societal marketing concept a firm can escape from being myopic.

Other reasons for marketing myopia may be as follows-

·         A company focused on short-term gains may need clearer short-term, mid-range, and long-term goals.

·         A company’s belief in the superiority of its product or services can prevent it from identifying competitive substitutes and planning to improve on competitor offerings.

·         Immediacy bias can pull a business owner’s attention away from long-term goals.

·         Stake-holder pressure. Business stakeholders can place a high value on immediate ROI, putting pressure on leaders to prioritize short-term gains over a long-term growth strategy. 

·         Fear of change. Changing your business model can introduce risk, but excessive caution enables myopic tendencies.

Trends in Marketing

Artificial Intelligence is boosting effectiveness and efficiency. 80% reduction in errors, prediction of queries.

Short term video content for YouTube and TikTok is driving social strategy.

Content ideas can be generated using AI tools like Google Gemini.

Using AI for marketing analytics:

one can learn about target audience, identify trends, predict behavior and optimize the marketing campaigns faster.

Short term video content drives social strategy. Marketers have to meet people where they are - YouTube, Instagram, Facebook, concise snackable content.

User Generated Content (UGC) is any content that users post about the company on their social media profiles. Then businesses can leverage that content through different tactics.

Community efforts and genuine branding encourage consumer trust. Community building is key for customer retention, social responsibility initiatives, and live video streaming.

‌Quality Editorial Content: Marketers will invest in editorial content like blog posts and podcasts to generate engagement, conversions, and promote thought leadership.

Search Engine changes shift SEO Strategies. SEO teams will expand into video, image, and audio search content.

Chatbots & virtual assistants expand conversational capabilities. They provide consumers with high-quality answers to common & easily answered questions.

Personalization enhances user experience. Machine learning product recommendations or augmented reality (AR) increase customer satisfaction. VR/AR offers consumers the opportunity to interact with products virtually before purchase.

Mobile-First Marketing enhances ad placement, loading times, and ultimately user satisfaction, positioning brands better, capturing attention where consumers are most active.

Influencer Partnerships reach target audiences through relatable, trusted voices.

Challenges of Marketing

1. Harnessing the power of social media.

Being abreast with newest social media platforms their reach, audience, followers, segment.

2. Developing Relationship with customers

 - get and create loyal customers

-B2B and B2C relationship marketing strategies 

- develop CRM

3. Improving the customer experience

4. Optimizing market performance.

 Forecast, ROI

5. Embracing AR & VR for creating immersive and interactive consumer experiences.

6. Optimizing for voice search thus shift in keyword strategy.

7. Sustainability and Ethical marketing to fulfill customer's expectations.

8. Dealing with ad blockers

Innovative strategy to be made.

Value Chain Creation

A value chain is a series of consecutive steps that go into the creation of a finished product, from its initial design to its arrival at a customer’s door. The chain identifies each step in the process at which value is added, including the sourcing, manufacturing, and marketing stages of its production.

Value chains help increase a business’s efficiency so the business can deliver the most value for the least possible cost

Michael E. Porter, of Harvard Business School, introduced the concept of a value chain in his book, “Competitive Advantage: Creating and Sustaining Superior Performance.” He wrote: “Competitive advantage cannot be understood by looking at a firm as a whole. It stems from the many discrete activities a firm performs in designing, producing, marketing, delivering, and supporting its product

Components of a Value Chain

In his concept of a value chain, Porter splits a business’s activities into two categories, primary activities and support activities, of which sample activities for each are listed below. Specific activities in each category will vary according to the industry.

Primary Activities

Primary activities consist of five components, all essential for adding value and creating competitive advantage:

1. Inbound logistics include functions like receiving, warehousing, and managing inventory.

2. Operations include procedures for converting raw materials into a finished product.

3. Outbound logistics include activities to distribute a final product to a consumer.

4. Marketing and sales include strategies to enhance visibility and target appropriate customers—such as advertising, promotion, and pricing.

5. Service includes programs to maintain products and enhance the consumer experience—like customer service, maintenance, repair, refund, and exchange.

Support Activities

The role of support activities is to help make the primary activities more efficient. When you increase the efficiency of any of the four support activities, it benefits at least one of the five primary activities. These support activities are generally denoted as overhead costs on a company’s income statement:

1.Procurement concerns how a company obtains raw materials.

2. Technological development is used at a firm’s research and development (R&D) stage—like designing and developing manufacturing techniques and automating processes.

3. Human resources (HR) management involves hiring and retaining employees who will fulfill the firm’s business strategy and help design, market, and sell the product.

4. Infrastructure includes company systems and the composition of its management team—such as planning, accounting, finance, and quality control.