marketing 421
group conformity (conformity bias)
Minimize conflict Tendency to behave similarly to the others in a group Even if doing so goes against your own judgment Cohort or Superiors
how to classify new products
New-to-the-world (really-new) products (10% of new products) New-to-the-firm products (20%) Additions to existing product lines (26%) Improvements and revisions to existing products (26%) Repositionings (7%) Cost reductions (11%)
observation method
Observation method involves watching customers using a product in their own environment. Observation is determined not by talking or asking but by watching attentively in scientific manner. Data are usually visual information, such as pictures and videos. The new product team observes the data carefully for actions, body language to identify unarticulated customer needs.
stategic planning
Ongoing marketing planning. Example: The annual marketing plan for a CD-ROM line calls for a line extension to meet encroachment of a new competitor selling primarily on price. • Ongoing corporate planning. Example: Top management adopts a strategy that says either own a market (meaning get either a fi rst- or second-place share) or get out of it. This will require new product activity in all desirable markets where the fi rm holds a minor position. • Special opportunity analysis. One or more persons (in the fi rm or a consulting fi rm) are assigned to take an inventory of the fi rm's resources (people, facilities, reputations, whatever). Example: A fi rm in the auto parts business called for an audit of its manufacturing operation. It turned out that manufacturing process engineering had been overlooked or just not appreciated— that skill could serve as the base for a new products program.
open innovation practice in P&G
Open Innovation uses use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.
performance need or satisfiers
Performance needs or satisfiers refer to standard characteristics that increase or decrease satisfaction by their degree (e.g., cost/price, ease of use, speed). These needs are typically "spoken". Customers can articulate these needs very well. E.g., in a hotel, it's waiting time, the size of the room, or free Internet access.
product management
Product Management is a strategic and business-oriented role, focused on delivering solutions to market needs. Identify profitable opportunities that meet market needs ‣ Convert customer needs to new products ‣ Launch products into the market ‣ Oversee products already in the market ‣ Wind down products that no longer meet market needs
internal idea sources
Refer to the company's own formal research and development, management and staff 33% of companies rated R&D as a leading source of innovation ideas
idea screening methods
web based survey multivoting
innovators
well-informed risk-takers who are willing to try an unproven product. Innovators represent the first 2.5% to adopt the product.
screening ideas
what important customer problem can you solve how are you going to do it how many customers are there that are willing to buy from you? why cna only you provide the solution how can you defend against others
when firms test market new product with large investment uncertainty about product or marketing program
when firms may not test market: simple line extension copy of competitor product low costs management confidence
Quality Function Deployment
(a method of project management and control) see this as the fi rst list of customer needs. A more common generic term is product description or product defi nition. In this book it will be called product protocol. Protocol means agreement, and it is important that there be agreement between the various groups before extensive technical work gets under way
new to the world
1. New-to-the-world Really-new products, Inventions that create a whole new market Breakthrough innovation or radical innovation 10% of new products Examples 1st Polaroid camera 1st Sony cassette Walkman 1st Microwave 1st Copy machine ex: forehead ads
new to the firm
2. New-to-the-firm products Products that take a firm into a category new to it "Me too" products 20% of new products Examples P&G brand coffee Canon laser printer
gilette product testing
200 volunteers come to work unshaven evaluate razors for sharpness of blade, smoothness of glide, and ease of handling
additions to existing product lines
3. Additions to existing product lines Line extensions that flesh out the product line in current markets 26% of new products Examples Tide Liquid detergent Bud Light HP LaserJet 7P
improvements and revisions to existing products
4. Improvements and revisions to existing products Current products made better 26% of new products Examples P&G's continuing improvements to Tide powder detergent, Ivory soap.
what percent of new products fail
40
new products at a lower cost
6. New products that provide the customer similar performance but at a lower cost May be more of a "new product" in terms of design or production. 11% of new products
whats a new product
A new product idea is a hypothetical suggestion which links a potential bundle of attributes with a potential market. A description of the idea What new attributes does it new product offers To solve what consumer problems Target which customer segments
concept development and testing
A product idea is an idea for possible product that a company can offer to the market. Concept development creates a detailed version of the idea stated in meaningful consumer terms. Concept testing asks target consumers to evaluate product concepts.
prospect theory
A theory that people value gains and losses differently and, as such, losses loom larger than corresponding gains 600$ lottery win generates psych satisfaction or pleasures 200$ parking ticket generates a relatively larger impact on subjective pain 1) Individuals evaluate outcomes not in an absolute manner, but relative to salient reference point (50degree day in winter versus summer0 2) Decreasing marginal sensitive to gains and losses 3) Loss aversion
adoption process
Adoption process is the mental process an individual goes through from first learning about an innovation to final regular use. Stages in the process include: awareness interest evaluation trial adoption
WHY DID THOSE PRODUCT FAIL
Adoption requires behavior changes! Transaction costs Psychological costs Underlying psychological processes often explain success and failure. Perceived gains and losses Framing effect Endowment effect Status quo bias
opportunity analysis
An underutilized resource. Example: A bottling operation, a strong franchise with dealers, or that manufacturing process engineering department. • A new resource. Example: DuPont's discovery of Surlyn, a material with hundreds of potential uses. • An external mandate. Example: The market may be stagnant, the competition may be threatening, or customer needs may be evolving. Challenges like this will cause the fi rm to search for new opportunities, as did the Tasty Baking Company in the case at the end of this chapter. • An internal mandate. Example: Long-range planning often establishes a fi ve-year-out dollar sales target, and new products people often must fi ll part of the gap between current sales and that target. That assignment is called the product innovation (and/or acquisition ) gap. Other common internal mandates are simply upper management desires
SUSBTITUTE EXAMPLE
BALLPOINT PEN REPLACED FOUNTAIN PEN
basic needs or dissatisfiers
Basic needs or dissatisfiers refer to basic expected features or characteristics of a product or service. These needs are typically "unspoken". If these needs are not fulfilled, customers will be extremely dissatisfied; but if these needs are fulfilled, customer satisfaction won't be increased either. E.g., in a hotel bathroom, it's the provision of soap, towels, toilet paper, hot water - none of which are ordinarily worthy of comment unless they are missing!
business analysis
Business analysis involves a review of the sales, costs, and profit projections to find out whether they satisfy the company's objectives New product sales Bass model: more people adopt latter imitators than early innovators Awareness-Trial-Available-Repeat Profits Break-even analysis Concept evaluation or pricing Conjoint analysis: how people value certain attributes The effect of new products on old products Cannibalization assessment
FAILED NEW PRODUCTS
COLGATE FROZEN DINNERS BIC UNDERWEAR COSMO YOGURT
three useful ways to practice creativity
Change the frameworks Connect and combine things together Challenge the assumptions
why do we study new products
Critical for future growth The challenge of creating radical innovation (totally new product categories) is viewed by business consultant Gary Hamel as "the most important business issue of our time." Accelerating innovation and business growth through innovation are the top business challenges according to the Industrial Research Institute. It is big business - billions of dollars annually on technical development alone.
delighting needs or delighters
Delighting needs or delighters refer to unexpected features or characteristics that impress customers and earn you "extra credit". These needs are also typically "unspoken". So, the customer doesn't know it is possible, and the business doesn't know there is a demand E.g., kiosks to check in or out; pet care service; multlingual staff, etc.
for every 100 ideas
For every 100 ideas, Fewer than 70 make it though initial screening Fewer than 50 pass concept evaluation and testing A little more than 30 make it through development About 30 make it through testing About 25 are commercialized 15 of these 25 (about 60%) are successful. Success rate is lower in consumer goods (51%) and as high as 65% in healthcare.
Group A were given coffee mugs and asked how much they would be willing to part with those mugs.
Group B were not given coffee mugs to indicate whether they would choose the mug or the money at each price point. People feel losses directed to owned goods more strongly (Group A) than gains which ownership has not been established (Group B)
idea screening
Idea generation increases the number of ideas, but idea screening to identify potential ones and remove others. Hundreds or thousands of ideas with only a few can pass idea screening Ideas are evaluated against criteria; most are eliminated Real? Is it real need and desire? Win? Can we win? substantial competitive advantage? Resources? Worth of doing? Fit company's growth strategy? Sufficient profits?
ikea
Ikea identifies unmet customer needs and commissions in-house and outsources Worldwide manufacturing partners to compete for the manufacturing rights. The firm also has excellent global logistics for product delivery to stores and customers.
external idea sources
In contrast, 41% of companies identified customers as a key source sources outside the company such as customers, competitors, distributors, suppliers, and outside design firms
indifferent needs
Indifferent needs refer to features or characteristics that are neither good or bad to customers. they do not result in either customer satisfaction or customer dissatisfaction. E.g. the color of the carpet, the brand of task chair etc.
sources of info for new product ideas
Internal sources Research and Development (R&D) Marketing and Sales Product improvements or line extension Production and Engineering More efficient Customer and technical services Exposed to problems which might be solved by new or modified products External sources Information from customers Information from competitors Information from suppliers Information from the scientific/technological world
product launch
Introduction of the new product When to launch Where to launch How to launch
crowdsourcing community
Inviting broad communities of people—customers, employees, independent scientists and researchers, and even the public at large—into the new-product innovation process ex: mystarbucksidea
product development
Involves the creation and testing of one or more physical versions by the R&D or engineering departments Requires an increase in investment Shows whether the product idea can be turned into a workable product. Involves employees and consumers for product use testing
do customers really know what they want
It's hard for people tell you what they want if they haven't seen it before. They know what their problems are, what they like, and what they don't like. Most of the ideas offered by consumers would be best characterized as product improvements. iPhone 5 to 5s An innovative company mission is to do what no customer expects them to do (delighter needs).
kano method
Kano method is a theory developed by Professor Noriaki Kano in the 1980s, which classifies customer needs into 4 categories. Basic needs Performance needs Delighting needs Indifferent needs The x-axis represents how good we are at achieving the customer's outcome (s), or CTQ's. The y-axis records the customer's level of satisfaction the customer should have, as a result of our level of achievement.
lead user
Lead user is a term developed by Eric von Hippel in 1986(Von Hippel 1986). His definition for lead user is: Lead users face needs that will be general in a marketplace - but face them months or years before the bulk of that marketplace encounters them, and Lead users are positioned to benefit significantly by obtaining a solution to their needs.
product testing
Many companies use their employees for product testing. Students might have worked at various consumer packaged goods companies, perhaps Quaker Oats, where they had to test cereal every day at lunch.
Observation Who should be observed? Who should do the observing? What behavior should be observed? Capture the Data Less focus on words/text; More on visual, auditory, and other sensory cues via photos and videos
Reflection and Analysis Identify all customers' possible problems and solutions Brainstorm for Solutions Transform observations into ideas Develop prototypes of solutions Tangible representation or role play/ simulation of ideas
repositioning
Repositionings of existing products Targeting new users or new markets 7% of new products, difficult to find new use Examples Arm & Hammer baking soda sold as a refrigerator deodorant Aspirin repositioned as a safeguard against heart attacks
SCAMPER
SUBSTITUTE, SIMPLIFY COMBINE ADAPT (RADIO IN cars) MODIFY, MAGNIFY, MINIFY (larger tvs) PUT TO OTHER USES ELIMINATE REVERSE, REARRANGE
test marketing cities
Test marketing is the stage at which the product and marketing program are introduced into more realistic marketing settings. Provides the marketer with experience in testing the product and entire marketing program before full introduction albany NY rochester NY greensboro nc birmingham al syracuse ny Albany has almost the same proportion of consumers as is found in the nation as a whole - from people just leaving home or school, buying a home, raising kids, approaching retirement, launching the kids out of the house, to being fully retired
awareness
The consumer becomes aware of the new product but lacks information about it.
evaluation
The consumer considers whether trying the new product makes sense.
adoption
The consumer decides to make full and regular use of the new product.
trial
The consumer tries the new product on a small scale to improve his or her estimate of its value.
COMMUNICABILITY
The degree to which the results of using the innovation can be observed or described to others. Because HDTV lends itself to demonstration and description, its use will spread faster among consumers. Other characteristics influence the rate of adoption, such as initial and ongoing costs, risk and uncertainty, and social approval. The new-product marketer must research all these factors when developing the new product and its marketing program.
divisibility
The degree to which the innovation may be tried on a limited basis. Early HDTVs and HD cable and satellite systems were very expensive, which slowed the rate of adoption. As prices have fallen, adoption rates have increased.
product life cycle
The course of a product's sales and profits over its lifetime. It involves five distinct stages: product development, introduction, growth, maturity, and decline. sales begin at introduction stage don't see profits until growth stage
relative advantage
The degree to which the innovation appears superior to existing products. HDTV offers substantially improved picture quality. This accelerated its rate of adoption.
compatibility
The degree to which the innovation fits the values and experiences of potential consumers. HDTV, for example, is highly compatible with the lifestyles of the TV-watching public. However, in the early years, HDTV was not yet compatible with programming and broadcasting systems, which slowed adoption. Now, as high definition programs and channels have become the norm, the rate of HDTV adoption has increased rapidly.
complexity
The degree to which the innovation is difficult to understand or use. HDTVs are not very complex. Therefore, as more programming has become available and prices have fallen, the rate of HDTV adoption has increased faster than that of more complex innovations.
open innovation
The process by which a firm searches for research, innovation, technologies, and products. Increases speed of research and innovation, cuts risks, and generates new innovative ideas. Viewed by some as the dominant innovation model of the 21st century. Inputs can come from internal sources (marketing, strategic planning) and external ones (customers, market information, etc.). Sources such as inventors, startup companies, or university laboratories are actively sought out.
globalization
Top firms deploy over 50% of their R&D spending in foreign countries. R&D engineers are lower paid than in the US Specialization skills: Indian in automotive engineering, China in electronics Innovating firms themselves seek to penetrate new markets Difficulties a cross-functional team with personnel from marketing, R&D, engineering, manufacturing, production, design, and other areas coordinating the efforts across multiple countries to launch a successful new product.
Asch's Experiment: Which of the lines A, B, and C is the same size as the line X ? confederates said B loudly to induce group think
What percentage of people, placed in this situation do you think would say "C"? 32% of the subjects conformed more than half the time 75% of the subjects in Asch's experiment gave a "conforming" answer at least once Give an obviously incorrect answer that agrees with the unanimous answer of the other subjects
early adopters
based on the positive response of innovators, early adopters then begin to purchase the product. Early adopters tend to be educated opinion leaders and represent about 13.5% of consumers.
global innovation culture
being aware of differences in business and cultural environments and being open to global markets - is important to success.
early majority
careful consumers who tend to avoid risk, the early majority adopts the product once it has been proven by the early adopters. They rely on recommendations from others who have experience with the product. The early majority represents 34% of consumers.
interest
consumer seeks info about the new product
eager sellers and stony buyers
consumers Comfort in familiarity Irrationally overvalue current products Do not like to change their behavior to use innovation companies Know their invention is superior Overvalue its benefits Assume consumers will leap at chance to buy
PSYCHOLOGY OF GAINS AND LOSSES
how people perceive something based on how it is portrayed If Program A is adopted, 200 people will be saved. If Program B is adopted, there is 2/3 probability that no people will be saved. If Program C is adopted, 400 people will die. If Program D is adopted, there is 1/3 probability that nobody will die.
new product development process
idea generation idea screening concept development and testing business analysis product development product launch
late majority
somewhat skeptical consumers who acquire a product only after it has become commonplace. The late majority represents about 34% of consumers.
framing effects
people consider positive framing as gains while negative framing as losses Ground beef can be described as being 75% lean or 25% fat
status quo bias
people have a tendency to select an alternative that is anchored as teh default for them even if a better alternative exists the current baseline (or status quo) is taken as a reference point and any change from that baseline is percieved as a loss
endowment effect
people value things in their possession more than when they don't have the item. Loss of item is large than gain Example- electric car Owners have to give up size, range, convenient and these have been part of the car offering for a long time so they seem like a large loss
procter and gamble
products are developed globally in the firm's 22 research centers located in 13 countries. Market research and testing of the Swiffer occurred in the U.S. and France.
group thinking
reach a consensus decision Without critical evaluation of alternative ideas or viewpoints Too strong interpersonal relationships lead to friendly agreement
three useful ways to practice creativity
reframing the problem (whats half of 13 = 6.5 or thir) connect and combine things together (a printer and a nose) challenge the assumptions (birthday exercise)
rogers five factors
relative advantage compatablity complexity divisibility communicablity
laggards
those who avoid change and may not adopt a new product until traditional alternatives no longer are available. Laggards represent about 16% of consumers