Chapter 6: "Developing Your Product" Marketing Management

Test Marketing

-A limited introduction of a product in geographic areas chosen to represent the intended market -Test markets must be a representative sample of the target market -The aim is to determine the extent to which customers will but the product

Market Introduction Stage "New Product"

-Build primary demand -Pricing: Skimming vs. Penetration (chapter 10) -From Introduction to Growth: Industry profits begin competitors enter the market

Sequential New-Product Development Advantages

-Company has more control over development of complex products. -Company can track project progress more easily

Product Characteristics that affect the rate of adoption

-Competitive advantage -Compatibility -Observability -Complexity -Trialability ex. microwave 1986: 25% of households 1997: 90% of households

Concurrent New-Product Development Advantages

-Delays in one area do not hold up work in other areas -Input from all areas happens through out the process -Problems may be recognized earlier in the process.

Stage 4: Business Analysis

-Estimating costs -Offshore organization -Identifying price -Estimate demand

Test Marketing Risks

-Expensive -Competitors may interfere -Gives competitors time to copy the product

New Product

-Faster and more economical transportation -Mass production -Advent of electronic communication

Stage 1: New-Product Strategy Development

-General guidelines -How new products will fit -Characteristics of products to be developed -Specifies target markets

Stage 5: Product Development

-Goods -Prototype -Services -Employee training protocol -Identify equipment -Determine staffing

Product

-Goods -Services -Ideas

Categorizing Risks in New-Product Development

-Highest level occurs when products in fail to generate sales or prove to be dangerous or defective -Significant risk when introducing internationally

Market Growth Stage

-Industry Sales Attract Competition -Build Selective Demand -Profits Peak and Begin to level off

Stage 2: Idea Generation

-Internal -External: "Outsource"

Sequential New-Product Development Disadvantages

-It can be time-consuming. -It can be inefficient -Delays in one area hold up work in other areas

Concurrent New-Product Development Disadvantages

-It's more difficult to control -It may create tension between functional areas

Test Marketing Benefits

-Lets marketers measure sales performance in a natural marketing environment -An opportunity to identify weaknesses in the product or marketing mix -Allows for experimentation with advertising, pricing, and packaging

Reducing Risks in New-Product Development

-Listening to the customer carefully -Making a commitment to the NPD process -Understanding current market trends and anticipating changes in the market -Asking the right questions -Being willing to fail occasionally.

Market Maturity Stage: "Sales Level Off, Profits Continue Down

-Persuasive, more costly promotion -Brands are more similar -Greater Price Competition/ Price Sensitivity -May last a long time

4 P's Stages during a products life cycle

-Product Strategies -Place Strategies -Promotion Strategies -Price Strategies

Stage 6: Test Marketing

-Product testing -Risks of test marketing -Economical options -Simulated test markets

Very High Risk

-Products fail to meet needs and wants of customers -Product proves to be dangerous or defective

Stage 7: Product Launch

-Purchase materials -Hire employees -Manufacture enough to fill distribution pipelines -Place good in warehouses -Prepare internal systems -Train new employees

High Risk

-Quality is not up to the customer -Supply of product is inadequate to meet demand New product is not accepted well in the marketplace

New-Product Development

-Sequential new-product development -Concurrent new-product development

Moderate Risk

-Supplier cost savings are not achieved. Product takes sales from existing products. -Competitors copy products and sell them at a lower price

Product Life Cycle Questions?

-Why is this theory so important? -Why is the term "product" life cycle misleading? -What is happening to the length of the PLC? Introduction of a product lifestyle -Is the shape for every individual product the same? NO -In what stage does a product new to the company enter PLC?

Stage 3: Idea Screening

-Will product sell? -Concept Test -Can it be developed and marketed within time/ budget? -Can it be produced?

Consumer Adoption Process

1. Awareness 2. Interest 3. Evaluation 4. Trial 5. Adoption

The Product Life Cycle Stages

1. Introduction 2. Growth 3. Maturity 4. Decline

New Product Four categories

1. New-to-the-Market Products 2. New Category Entries: new to company not the market 3. Product Line Extensions: add new functions, flavors, or other. 4. Revamped Products

New-Product Development (NPD) stages?

1.New-product strategy development 2. Idea generation 3. Idea screening 4. Business analysis 5.Product development 6. Test marketing 7. Product launch

Simulated marketing test

A way to reduce costs and risks

Types of Adopters

Innovators: 2.5% Early adopters: 13.5% Early majority: 34% Late majority: 34% Laggards: 16%