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MARK 201
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MarketingComm 223 NotesChapter 10NewProduct Development and Product LifeCycle Strategies 1 New Product Development StrategyA firm can obtain new products in two waysaAcquisitionBuying a whole company patent or a license to produce someone elses productbNewproduct development effortsThe development of original products product improvements product modifications and new brands through the firms own product development efforts own RD Ex Canadian inventorsReginald Fessenden invented amplitude modulation AM radioAdvantages of new productsCustomersBring new solutions and variety to their livesCompaniesKey source of growthInnovation can be risky and expensive80 of all new products fail or dramatically underperformWhy do so many new products failoCompany may overestimate market sizeoActual product may be poorly designed oIncorrectly positionedoLaunched at the wrong timeoPriced too high oPoorly advertisedEx Cucumber antiperspirant spray Premier smokeless cigarettes2 The NewProduct Development Process To create successful new products a company must understand its consumer markets and competitors and develop products that deliver superior value to customersEight Major Steps in the Process 1Idea GenerationDefnThe systematic search for new product ideas Hundredsthousands of ideas lead to a few good ones Sources of new product ideas include internal and external sources customers competitors distributors and suppliersaInternal Idea SourcesoResearch and Development 33 of companies rated this as a leading source of innovative ideasMarketingComm 223 NotesoCustomers 41oHeads of company business units 35oEmployees 33oSales Force 17Ex Twitters Hack WeekEmployees form teams to work on a variety of independent projects focusing on the improvement of TwitterbExternal Idea SourcesoDistributorsPossess information on consumer problems and newproduct possibilitiesoSuppliersAdvise the company about new concepts techniques and materials that can be used to develop new productsoCompetitorsAnalyze competing new products oOthersTrade magazines shows seminars govt agencies advertising agencies marketing research firms university and commercial laboratories and inventorsoCustomersAnalyze customer questions and complaints or offer them to suggest their own ideasEx My Starbucks IdeaCustomers can sharediscussvote on new product ideascCrowdsourcingoInvites broad communities of people into the newproduct innovation processEx NetflixPrizecomNetflix wanted to improve the accuracy of its Cinematch online recommendation system therefore rather than hiring computer scientists it promised a 1 million prize to anyone who can submit the best solution to improving accuracy by at least 10 percent2Idea ScreeningDefnScreening newproduct ideas to spot good ideas and drop poor ones asap Prod costs rise quickly in later stageswhich products are most profitableRWW Real Win Worth DoingoReal Must determine if there is a real need for the product oWin Does the product offer sustainable competitive advantageoWorth Doing Is there sufficient profit potential Does the product fit the companys growth strategy3Concept development and testingDistinguish betweenProduct ideaIdea for possible product that the company can offerProduct conceptDetailed version of the idea stated in consumer termsProduct imageThe way consumers perceive an actualpotential productaConcept DevelopmentMarketingComm 223 NotesoPlacing a product into alternative product conceptsoFinding out how attractive each concept is to customersEx Teslas initial allelectric roadsterCan be used asoSecond family caroSports car for young singlesoGreen caroUtility vehiclelove spacebConcept TestingoTesting newproduct concepts with groups od target customers to find out if the concepts have strong consumer appealoWordPicture description of productoPhysical representation of the conceptoConsumers may be asked to react by answering questions4Marketing strategy developmentDefnDesigning an initial marketing strategy for a new product based on the product concept chosenThe marketing strategy statement consists of three partsoDescribing the target market planned value proposition sales market share and profit goals for the first few yearsoThe products planned price distribution and marketing budget for the first yearoThe planned longrun sales profit goals and marketing mix strategy5Business AnalysisDefnA review of the sales cost and profit projections for a new product to find out whether these factors satisy the companys objectivesEstimate sales by looking at sales history of similar products Estimate expected costs and profit of marketing RD operations accountingand financeused to analyse products financial attractiveness6Product DevelopmentDefnDeveloping the product concept into a physical product to ensure that theproduct idea can be turned into a workable market offering RD department will develop and test one or more physical versions of theproduct concept develop prototypes Companies can do their own product testing or involve actual customers in this processEx New Balance Tester SchoolConsumers can test out New Balances shoe designs by attending the Tester School and learning how to properly analyze the fit function and durability of their shoes During 8 weeks they
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