Product strategy II

1. Product strategy II Module 6 Chapter 7

2. Lecture overview • What is a new product? • Why do many new products fail? • New product development process • New product adoption • Product lifecycle stages • Product lifecycle strategies

3. Categories of new product • new to the world • Elastoplast scar reducer • new product lines • Maggi balanced meals • additions to product line • i.e. new model/style/flavour • product improvements • reduced sugar tomato sauce • repositioned products • lower-priced products L’Oreal new cheaper range Garnier

4. Why do new products fail? • no need or inadequate demand • market too small • AIBO pets • inadequate resources and lack of expertise • not unique or superior • not Another mousetrap • This is unique

5. Why do new products fail? cont… • inadequate channel support • competitors’ reactions • poor marketing • poor implementation of marketing plans • faulty product and technical problems • getting it right is important • a famous example: Edsel

6. Will this product succeed?

7. How about this one for SNAGS?

8. Would this be useful for lectures?

9. And one for noodle eaters in a hurry!

10. How about this for a winter’s day!

12. New product strategy • links new product program to corporate and marketing objectives • provides focus and guidelines for new product program • specifies role new products play in overall organisational plan • describes characteristics of products to be offered • identifies markets to be served

13. Idea generation • systematic search for new product ideas • what are the main sources of new product ideas? • employees • customers • competitors • distributors (resellers) and suppliers • research and development • consultants • secondary sources • publications, market research firms, inventors etc • Famous Australian Inventions

14. Brainstorming • getting a group to think of unlimited ways to vary a problem or solve a problem • all and many ideas are considered • withhold judgement • example • bothersome technique • what problems do you experience using a product?

15. Idea screening • spot good ideas and drop poor ideas • screening criteria • does it fit with our new product strategy • company and marketing objectives • do we have the capability (resources and expertise)? • can we distribute the product (channel overlap)?

16. Concept development and testing • a product concept is • a detailed version of the product idea stated in meaningful consumer terms • concept testing involves • testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal • ACNielsen

17. Business analysis • estimate demand, sales, costs and profits • do these meet our company objectives? • refer to Entrepreneurial insight on page 228 – small business checklist • ROI • sales • length of growth phase • capital investment payback • premium price potential

18. Business analysis addresses…. • likely demand • sales, profits, market share, ROI • impact on existing lines • cannibalisation • is there a real need? (customer benefits?) • impact on company image • impact on employees/staffing levels • resources and facilities required • competitor’s likely reactions • risk of failure

19. Marketing strategy • who would be the target market? • what is our planned positioning? • marketing mix - price, promotion, distribution? • revenues and expenses • marketing budget

20. Development • developing the product concept into a physical product • developing prototypes • functional testing of prototypes • does it do what it is supposed to do? • level of performance • durability, reliability • product use testing • patenting your new product • Big ideas network • Patenting your idea

21. Test marketing • the product and the other elements of the marketing mix (price, promotion and distribution) are tested in a more realistic market setting. • ACNielsen • what makes a good test market? • Exhibit 7.2, p. 230

22. Why don’t some firm test market? • time • cost • secrecy • sabotage • short product lifecycles • alternatives to test marketing • simulations

23. The product is now ready for launch Commercialisation • introducing the product into the market • the launch • when? • where? • to whom? • how?

24. Awareness New product adoption process Interest Evaluation Trial Adoption

26. Marketing implications • word of mouth communications • opinion leaders • marketing communications • identify influentials (early adopters) • revise messages across adopter categories

27. Is the product consistent with existing values, needs, experiences? Is the product easy to understand and use? Complexity Compatibility Trialability Relative advantage Can the product be tried on a limited basis? Observability Is the product superior to existing substitutes? Can the benefits be observed and communicated? Influences on rate of adoption Influences on adoption rate

28. Is it compatible with the way we are used to doing things? • Switching from type to word processing

29. Product development • sales are zero • high cost of development • profits are negative

31. Introduction • sales are slow • costs are high • promotion & distribution • profits are negative • few, if any competitors

32. Growth • sales increase slowly in early growth, and then rapidly in late growth • costs fall as sales volume increases • profits improve and peak at the end of the lifecycle • competitors enter the market • ‘me-too products’

33. Maturity • sales peak at early maturity and then start to decline • promotional costs are high • profits decline • many competitors erode market share

34. Decline • sales drop • profits fall • firms exit the market • Supply warehouse

35. The marketing strategy needs to be adapted across the life cycle • refer to Exhibit 7.5. p. 236 • for each stage, need to modify: • marketing objectives • marketing mix • product • price • promotion • placement

36. marketing objective create awareness gain trial product basic offering pricing usually skimming (high price) strategy revenues need to cover high costs of development and launch promotion develop primary demand create awareness, inform and target innovators personal selling to distributors placement attract distributors build inventories selective distribution Introduction strategies

37. marketing objective build market share product modifications add features pricing hold steady may fall slightly in late growth as competition increases promotion target early adopters and early majority build selective demand aggressive advertising placement intensify distribution establish relationships with distributors Growth strategies

38. marketing objective maximise profit while defending market share product major modifications differentiated product pricing competitive pricing price wars promotion aggressive sales promotion brand loyalty placement more intensive consider alternative channels Maturity strategies

39. marketing objective reduce costs and milk for profits product rationalise offering pricing cost-based may sell below cost to clear promotion reduce expenditures placement rationalise outlets selective distribution Decline strategies

40. The product lifecycle may describe • product category • i.e. cars • product form • i.e. sedan or station wagon or sports

41. Shape of the product lifecycle • refer exhibit 7.4, p. 233 • style • recurring lifecycle • Flared Jeans • Platform shoes • fashion • shorter lifecycle • fad • short, sharp lifecycle • Yo-yos

42. Summary • types of new product • reasons why new products fail • seven steps in the new product development process • new product adoption • product lifecycle stages • development, introduction, growth, maturity, decline • marketing strategies needs to be adapted across the product lifecycle