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Why study NPD?

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-Big Risk The new product process is difficult! 40% of new products fail -Big $$$$ Competitive advantage in marketplace Higher profits for organization

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Innovation Types: Radical

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New technology New market

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Innovation Types: Incremental

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New features or benefits to existing technologies Existing market

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5 Stages of NPD

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1) Opportunity Identification/Selection 2) Concept Generation 3)Concept/Project Evaluation 4) Development 5) Launch

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Phase 1: Opportunity ID/Selection

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Look for opportunities Analyze and rank the opportunities Give major opportunities a preliminary strategic statement to guide further work on it

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Phase 2: Concept Generation

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Select a high potential/urgency opportunity, and begin customer involvement -Formally develop product concepts Develop ideas for products that will allow the firm to take advantage of the opportunity

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Phase 3: Concept/Project Evaluation

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Evaluate new product concepts -Technical components - does the firm have the capabilities? -Marketing - testing with consumers -Financial criteria - what is the payoff associated with the idea Rank them and select the best two or three

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Phase 4: Development

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Specify the full development process and its deliverables Technical Tasks -Prototype development -Production considerations Marketing Tasks -Prepare marketing strategy, tactics, and launch plan --Final packaging, branding, communications plan -Finalize business plan

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Phase 5: Launch

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Commercialize the product -Begin selling the product -Make sure the marketing strategy is working

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Why NPD process is important

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Helps manage the risks of product development through gates Helps guide them to focus on key activities such as marketing and customer testing Helps keep the communication lines open between different departments

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What is a brand?

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A name, term symbol, sign, or design -Provides an identity -Differentiates from competitors

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Branding

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helps firm differentiate their product from others Build positive customer perceptions

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Brand Equity

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-the value of the brand -How much the brand is worth beyond the product or organization's assets --Competitive advantage --Can charge customers the product at a premium -Does not happen by chance --Result of a building process over time

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3 Strategies for Branding

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Multiproduct branding Multibranding Private label

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Multiproduct branding

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Use the same brand name for all of their products within a product class (samsung or canon)

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Multibranding

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Each product within a product line has a unique brand name P&G has duracell crest pantene gillete

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Private label

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Manufacturer supplies a reseller with a product they can brand for themselves

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New Brand

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firms develop a new brand for a new product category

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Brand Extension

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Use the organization's current brand name to enter a new product category -Reduce risk for the new product

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Flanker

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Adding new brands to the high or low end of the price point to protect the flagship brand of a firm -Risk of cannibalization

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Line Extension

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Introduce new products within the same brand and product class it currently operates in -Most common, add variety to the product line -Lower cost and raises brand awareness

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Brand Extensions: Advantages

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-New product acceptance Lower perceived risk by consumers Helps with distribution Lower marketing expenses -Benefits to the firm Build the overall brand Attract new customers Add to brand meaning

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Brand Extensions: Disadvantages

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Brand confusion or dilution Resistance from retailers Potential to harm the overall brand Cannibalization

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Role of Price in Strategy

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The only "P" that has a direct impact on firm profitability Profit = Revenue - Cost Most easily manipulated component of the marketing mix

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Elastic Demand

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If % change in quantity is higher than the % change in price

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Inelastic Demand

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If % change in quantity is lower than the % change in price Price reduction will not impact demand

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Pricing Strategies

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Full-cost Variable-cost New product pricing Other strategies

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Full-cost pricing strategies

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Markup pricing Break-even pricing Rate-of-return

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Variable-cost pricing strategies

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A way for firms to impact the demand of the product Can increase demand or shift the demand curve based on price Relevant costs for this pricing strategy are only variable costs, not fixed costs

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New product pricing strategies

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Price skimming Market penetration pricing

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Other Strategies

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EDLP, Competitive, Just-Below

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Bundling

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When a firm offers multiple products together for one price

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Partitioned Pricing

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Price charged as separate parts, instead of a single price Becoming more common because consumers do not process the base price and surcharges completely and accurately Ex: Catalog sale + shipping cost

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Promotional Pricing

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Setting the price lower as part of the promotion strategy the firm is following

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Pricing Services

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Pricing of services can be challenging -Consider the complexity of services --Attorneys, accountants -Should consider: --Service delivery costs --Price expectations of customers --Competitors pricing ---Generally the higher the market share held by a service provider, the higher the price it can charge

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Marketing Communications: Goals

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Generate awareness Education Impression management Stimulate purchase intentions Help make the sale

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6 M's Model

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Market Mission Message Media Money Measurement

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Promotion Mix

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Advertising Public Relations Sales Promotion Direct Marketing Personal Selling

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Advertising

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Communication that is not personal in nature Paid for by the organization Mediums include: radio, newspaper, television, magazines, online, etc

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Advantages and Disadvantages of Advertising

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Advantages: Potential to reach a large audience Good for creating awareness, educating consumers, and encouraging product trial Disadvantages: Expensive - depends on medium selected Diminishing returns

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Public Relations

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Communication that is not personal in nature -Not paid for by the firm -Examples: Press releases, sponsorships, public service announcements

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Advantages and Disadvantages of Public Relations

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Advantages: Viewed as being more credible than advertising Inexpensive Disadvantages: Out of the organization's control May be difficult to get the story picked up

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Sales Promotion

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Provides customers with a direct incentive to purchase the product -Includes coupons, rebates, free samples and sales contests

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Advantages and Disadvantages of Sales Promo

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Advantages: Help stimulate product trial and purchase Disadvantages: Redemption rates are low Does not lead to buyer loyalty Needs to be a complement to advertising or other forms of communication

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When are Sales Promotions Useful?

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Promotions are also useful in a B2B setting -"Push" the product through the channels of distribution -Provide incentive to stock a product, purchase more of the product, promote the product to customers, and offer the product at a reduced price Examples: slotting allowances, volume and price discounts, salesperson contests, and cooperative advertising

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Direct Marketing

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Direct (personal) interaction or communication with customers Examples: direct mail, catalogs, telemarketing, online marketing

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Advantages and Disadvantages of Direct Marketing

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Advantages: Allows the firm to understand response rate based on direct communications Effective in prompting customers to ask for more information and in promoting sales Good for segmented markets Disadvantages: Some consumers find direct marketing intrusive

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Personal Selling

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A form of direct marketing that occurs face-to-face between the organization and the customer

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Advantages and Disadvantages of Personal Selling

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Advantages: Can provide a lot of information to the customer Feedback is immediate Disadvantages: Expensive Can be difficult to reach all customers

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Social Media

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An essential element to any organization's communications strategy -Helps firms provide content to customers, connect with customers, and build community among customers -Examples: blogs, Facebook, Twitter, Foursquare, Instagram, Yelp, YouTube

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Advantages and Disadvantages of Social Media

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Advantages: Promotes word-of-mouth marketing (credibility) Inexpensive Disadvantages: Firm does not directly control all of the messages

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Functions of Marketing Channels

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Communicating about the product Managing inventory Distributing the product Communicating feedback Alleviating financial risk

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Types of Marketing Channels

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Direct & Indirect (go over slide)

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Influences on Channel Length

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Market Considerations Product Considerations Manufacturer Considerations

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Intensity of Distribution

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Strategically consider how many outlets will carry the product -Intensive -Selective -Exclusive

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Channel Conflict

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Interdependent system Every channel member adds value The objectives associated with the channel can conflict with the specific goals of the organization

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Horizontal Conflict

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Occurs with firms at the same level of the channel.

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Vertical Conflict

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Occurs with firms at different levels in the channel (e.g. between wholesaler and retailer)

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Mark Up Pricing

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Useful for everyday pricing decisions -Grocery stores and other retail stores Simple and easy to execute

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Break-Even Pricing

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Understand the minimum price you can sell the product for and cover costs

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Rate-of-Return Pricing

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= Profit/Investment or =(price*quantity)-(cost*quantity)/investment Managers set price so a guaranteed return is achieved

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Variable-Cost Pricing

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Way for firms to impact the demand of the product Relevant costs are variable not fixed costs Ex) Movie theaters- discounted prices for low-demand times

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Price Skimming (new product pricing)

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Set price high at first then price goes down Works well where demand is inelastic (low effect when price changes)

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Market Penetration Pricing (new product pricing)

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-Charge low at first -works well for products with elastic demand -competition can easily develop their own version of same product

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EDLP

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Extension of market penetration pricing Firm keeps prices low less reliance on rebates, coupons, promos

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Competitive Pricing Strategy

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Firm sets the price consistent with that of competitors products Offer price matching programs at store

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Psychological pricing

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Just-Below Pricing- "2.99 vs 3, 199 vs 200 Customary- offer the product as smaller size One-sided price claims-promote superiority of price for single attribute in product

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Product Line Pricing

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Must consider the relationship between the price levels of a firms product lines Pricing must reinforce differentiation

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MKT COM Two way with instant response

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Personal Selling Email & Telemarketing (Customized)

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MKT COM Two way with response delay

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Direct Mail Catelogs

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MKT COM One way

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Advertising Radio, Newspapers, Magazines, TV Mass Com Create awareness

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