Categories of New Products
New-To-The-World
New Product Lines
Six
Categories Product Line Additions
of
New Improvements/Revisions
Products
Repositioned Products
Lower-Priced Products
MKTG 501 Week 3
New Product Introductions
• New Formulation 47.1%
• Positioning 39.1
• Packaging 8.6
• New Market 3.4
• Technology 1.1
New Product Development Process
New Product Strategy
Idea Generation
Idea Screening
Business Analysis
Development
Test Marketing
Commercialization
New Product
Why Some New Products Succeed
Success Factors Failure Factors
Good match between product Poor match between
and market needs product and market
needs
Adequate target market size
Overestimation of
Offers a clear, meaningful market size
benefit
Incorrect positioning
Distinguishable from substitute
products Inappropriate price
Offers unique, superior value Inadequate
distribution
Organizational commitment to
new product development Poor promotion
The Product Life Cycle
Introductory Growth Maturity Decline
Stage Stage Stage Stage
Product
Category Sales
Dollars
Product
Category Profits
0
Time
The Importance of New Products
New product 1
New product 2
Sales volume
Sales volume
Dollars
Profits Profits
+
0
–
Time
Adopters’ Categories
ADOPTERS’ CATEGORIES BASED ON INNOVATIVENESS
Percentage of Adopters
Early Early Late
Innovators Adopters Majority Majority Laggards
2.5% 13.5% 34% 34% 16%
Time
The Diffusion Process
Relationship of the Diffusion Process to the
Product Life Cycle
Introduction Growth Maturity Decline
Cumulative Percentage of Adoption
100
Product
90 life cycle
80 curve
70
Early majority
60 Late majority
50
Early adopters
40
30 Innovators
Laggards
20
10
Diffusion
curve
0
Time of Adoption of Innovations
Rate of Adoption
Complexity
Compatibility
Characteristics
Affecting
Relative Advantage
New Product
Diffusion
Observability
Trialability
Unique Characteristics of Services
Intangibility
Characteristics Inseparability
That
Distinguish
Services Heterogeneity
Perishability
Core & Supplementary Services for Federal Express
Advice and
Problem solving information Order taking
Overnight
Billing transportation Supplies
statements and delivery of
packages
Tracing Pickup
Documentation
Source: Adapted from Christopher H. Lovelock, Services Marketing, 2nd Ed., (Englewood Cliffs, NJ: Prentice-Hall, 1991), p.18.
Four Promotion Strategies for Services
Stressing Tangible
Cues
Using Personal
Common Information
Strategies to Sources
Promote Creating a Strong
Services Organizational
Image
Engaging in
Postpurchase
Communication
Three Levels of Relationship Marketing
Potential for
Degree of Main element long-term
Type of service of marketing advantage
Level bond customization mix over competitors
One Financial Low Price Low
Two Financial Medium Personal Medium
and social communications
Three Financial, Medium to Service High
social, and high delivery
structural
Customer Value
Customer = Perception of
Value ( Benefits
________
Sacrifices )
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
The Customer Value Triad
Value-Based
Prices
Goods Service
Quality Quality
Source: Adapted from Earl Naumann, Creating Customer Value (Cincinnati, OH: T homson Executive Press, 1994), p. 17.
Techniques of Quality Improvement
Quality Functional
Deployment
Benchmarking
Essential
Continuous
TQM Improvement
Techniques
Reduced Cycle
Time
Analysis of
Process Problems
Components of Service Quality
Reliability
Responsiveness
Components of Assurance
Service
Quality
Empathy
Tangibles
The Gap Model of Service Quality
Customer
Expected
Service
(Gap 5)
Perceived
Service
Service Communication
Provider Delivery with Customers
(Gap 4)
(Gap 1) (Gap 3)
Service Quality
Specifications
(Gap 2)
Management
Perceptions
Economic Effects of Customer Loyalty
Lower Acquisition
Costs
Base Profit
How
Customer Revenue Growth
Loyalty
Helps Cost Savings
Companies
Referrals
Price Premium
Manufacturer The
Wholesaler Retailer
Consumer
Manufacturer The
Wholesaler Retailer
Consumer
Manufacturer The
Wholesaler Retailer
Consumer
Manufacturer Industrial
User/OEM/
Distributor
Manufacturer Industrial
User/OEM/
Distributor
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
Evolution of Marketing
Concept:
Implications 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
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
Contact Efficiency
S S S S
Direct
Only =
12 transactions B B B
S S S S
With 1
intermediary = I
7 transactions
B B B
Types of Wholesalers
Possess Title Negot Promo
• Merchant Wholesalers Y Y Y Y
– independently owned
• Mfgr’s 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
How Retailers
Create Value
- Right Merchandise Increases
- Good Shopping Atmosphere
Customer
- Decreased Shopping Risk
Utility
- Convenience
Enhances
Value
- Control of Costs Reduces
Price
• Selling
• Service
• Store Design
• Location
• Merchandise
• Pricing
• Promotion
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
The Margin-Turnover Tradeoff
High Hi Margin
Lo Turnover
Margin
Lo Margin
Low Hi Turnover
Low High
Turnover
Competition Among Strategic Groups
High
Traditional Prestige
Dept. Stores Stores
Merchandise
Offering Mass
(quality, Upscale Merchandisers
selection, Discounters
fashion, etc.)
Low Discounters
Low High
Price
Ways of Creating Differential Advantage
within Strategic Groups
Price
Atmosphere
Location & Service