Chapter 6 Flashcards
Types of products
New products are generally classified according to organisational or consumer classifications.
organisational classifications of new products
New to the world.
New category.
Additions to product lines.
Repositioning.
Additions to product lines.
Examples of traditional product line extensions would be y Coke Light, Vanilla milk and herbal toothpaste.
Product improvement. This involves improving product attributes, such as new and y improved cleaning detergents.
Repositioning.
Products are repositioned for a new use or application. Jik, for example, can be used as a bleach and to keep flowers fresher for longer.
New category.
Product mix expansion can create new categories for the organisation.
Apple, for example, has diversified its product mix from laptops and desktops, to Ap- y ple TV, iTunes, Apps, Mp3s, Tablets, to the potential iWallet.
New to the world.
These would be inventions such as 3D computer monitors, mobile y fuel cells and electric nano motors.
Consumers’ classifications of new products
Continuous innovations.
Dynamically continuous innovations.
Discontinuous innovations.
Dynamically continuous innovations.
Technology is used to improve new products and a higher level of new learning is demanded of consumers.
Discontinuous innovations.
These innovations include completely “new-to-the world” products that have been developed to perform a function that no product has previously been able to perform. This type of innovation requires significantly higher consumer education levels.
Continuous innovations.
This classification includes most forms of new products such as new cell phones, motor cars and laptops. Consumers in this category experience
low levels of learning.
Reasons why products succeed
Ability to identify with consumer needs
Use of existing company expertise and resources
Emphasis on product testing
Coordination between research, development and marketing
Entrepreneurial culture in the y organisation
Linking new product development to corporate goals
Reasons why products do not succeed
Shortage of new and innovative ideas Insufficient marketing capabilities
Social and governmental pressures
Shorter life span of products owing to improved technology
Cost of new product development
Product not unique enough
Product pricing is too high relative to market alternatives
Insufficient market research conducted
No top-performing product already in the market from which to leverage
Organising NPD
Organisations spend a significant number of resources organising various departments, divisions or suppliers in order to obtain the best combination possible for new product development.
The following generic types of organisational structures have been identified:
New product department. New product committee. Venture teams. Consultants. Product manager.
New product department.
This centralised decision-making unit incorporates staff into an NPD, instead of in a line function.
This type of undertaking is generally conducted by larger companies because a significant number of resources are spared and redistributed for the NPD process.
New product departments are generally responsible for the complete NPD process.
New product committee.
This organisational structure involves bringing together various staff members from different teams and synergising them into a working unit. Product committees will therefore coordinate the various levels of the NPD process, and are generally characterised by the pooling of resources for effective NPD execution.
Venture teams.
Venture teams are separate from an organisation and are generally as- simulated from different departments in the organisation. These teams are recruited on a task basis and therefore only resume normal employment duties once the objective has been achieved.
Consultants.
Consultants are externally recruited individuals (or companies) that bring various specialised skills into established NPD teams.
These skills usually include design, branding, advertising and so on.
Product manager.
Product managers are the typical custodians of the NPD process and are therefore specialists in their respective product markets.
The six phases in the NDP process.
step 1: creating and developing new product ideas
step 2: ideas and concepts for new products
step 3: physical product development and testing
step 4: forecasting sales potential
step 5: branding and packaging
step 6: commercialisation
step 1: Creating and developing new product ideas
This is arguably the principal step in the NPD because it provides the necessary modus operandi for the new product and also sets the scene for defining objectives, policies and goals that provide the essential guidelines for the rest of the process.
- This phase includes the following strategic and developmental strategies:
Developing a product-market strategy
Formulating a strategy for product areas and development
Collecting sources for new ideas
Identifying and allocating NPD resources
- The various sources of ideas for new product development:
Needs
Success of others
Technological possibilities
Company strengths and weaknesses
Needs
Exploring new growth areas Market surveys to identify related products Trends in consumption patterns Intelligence on defective products Information on new materials
Success of others
Successful products operating in international markets
Trends or competitor products
Observations of competitive product purchasing behaviour
Technological possibilities
Patent information
Scientific journals
Research articles
Presentation at academic conferences Technology reviews from leading industry experts
Company strengths and weaknesses
Trends in competitor research and development
S & W of the research and development department
S & W of marketing departments or units Information from new product testing
step 2: ideas and concepts for new products
The processing of new ideas and concepts for further analysis and possible development.
This process not only provides the necessary definitions on market segmentation criteria and product differentiation policies, but also explores the definitions of consumer needs and consumption patterns.
This process is supplemented by means of constant information acquisition, relating specifically to market-based research and technological advancements.
step 3: physical product development and testing
The actual physical development of the product for testing and evaluation purposes. The results of this process are often plugged back into the NPD process for redefinition, and these test products sometimes provide the necessary teachings to ultimately create ground-breaking new innovations.
In this stage of the NPD process, organisational teams should address their original product definitions, product-market policies and objectives and evaluate their budget expenditures.
Organisations should also identify whether the NPD process is sustainable and therefore capable of producing the same desired set of results under realistic conditions.
step 4: forecasting sales potential
Unfortunately, there is no single forecast method or measurement that can accurately and completely predict new product sales and performance across all markets.
Organisations often base their sales forecasts on similar-type product sales and or volumetric forecasting.
This type of analysis is generally based on current and historical reviews.
Another type of forecasting measure is to set up test markets, where sales tracking (and product performance and customer satisfaction) can be measured and tracked for estimations and market corrections.
step 5: branding and packaging
Branding and packaging are two vital product attributes to consider because both provide exposure points for consumers to reference.
step 6: commercialisation
Placing a product on the market is expensive because various manufacturing, operational and transportation requirements have to be met in order to launch the product from concept to consumption.
Owing to this extensive cost consideration, organisations can- not afford to launch products inefficiently and ineffectively.
Critical evaluations should be conducted on original marketing plans and objectives, as well as performance evaluations of supply chain logistics.
-As a marketer, you need to be able to assess all the necessary controls involved in the NPD process to ensure that all criteria have been met. Note the following considerations:
market concentration and segmentation
entry market positioning (market leader or market follower?)
market penetration techniques and strategies
market development – identifying new markets
product modernisation or upgrade schedules
strategic integration – allowing new products to pave the way for other organisational
offerings
Diffusion of Innovasion
Innovators Early adopters Early majority Late majority Late adopters, laggards or non-adopters
Late adopters, laggards or non-adopters
The last group of adopters are typically characterised by a rigid sense of purchasing behaviour, high levels of scepticism relating to new products and limited financial resources. Because their information sources are generally other laggards, mass media messages are typically meaningless for them.
Late majority
This group of consumers are generally less educated, have fewer sources of information, and tend to be sceptical of new product ideas. They are also less likely to follow opinion leaders and often require a fair amount of pressure from their own peer groups in order to try out new products and services.
Early adopters
Early adopters typically consist of grounded middle-class individuals whose purchase behaviour is more deliberate then the previous two groups of individuals. They have a great deal of confidence in obtaining purchase-related information from mass media, salespeople and opinion leaders.
Early adopters
This group of consumers are normally opinion leaders in new products and services.
They tend to spread the news of the related product’s performance throughout their social networks and communities.
Although their information-searching process is ordinary, they tend to have the greatest contact with salespeople.
Innovaters
Because innovators are the first consumers to try out a new ideas and offerings, they are more willing to take purchasing risks.
These individuals are more educated, young, generally more financially affluent and have relatively extensive social networks.
Their information-searching process is usually more extensive and they rely primarily on scientific or technical information instead of salespeople.
Consumer Adoption Process
Awareness. Interest. Evaluation. Trial. Decision. Confirmation.
Interest
In this step, the individual becomes interested in the innovation and actively seeks new and supportive information.
Evaluation
At this stage of the adoption process, the individual weighs the various sets of information obtained into a short list of “pros” and “cons”, and decides whether
y to or not to accept it.
Trail
The individual may purchase the product to experiment with it or perhaps sample the product if it is too expensive. This stage is often pivotal in the decision-making process because the nonexistence of experimentation may lead to rejection of the innovation.
Decision
This stage involves the actual decision to adopt or reject the innovation. If the customer is satisfied with the evaluation of the innovation, then adoption and future regular use may potentially occur.
Confirmation
This stage is characterised by the continuous re-evaluation of post-purchase performance and criteria.
Cognitive dissonance is often a reality in this stage, and individuals regularly seek information from various sources in support of the purchasing decision.
Awareness
The first stage of the adoption process is categorised by the individual becoming exposed to the innovation but lacking support information.
He or she has not yet been inspired by the innovation.
