Creating Successful Long Term Growth

WEEK 12 & 13:
CREATING SUCCESSFUL
LONG-TERM GROWTH
Introducing New Market
Offerings
Discussion Questions
1. What challenges does a company face in developing
new products and services?
2. What organizational structures and processes do
managers use to oversee new-product development?
3. What are the main stages in developing new products
and services?
4. What is the best way to manage the new-product
development process?
5. What factors affect the rate of diffusion and consumer
adoption of newly launched products and services?
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New Product Options
Make or Buy
Improved
Formula
Types of New Products

New-Product Development Challenges
The Innovation Imperative
New Product Success
New Product Failure

Organizational Arrangements
Organizing New
Product Development
Customer-driven Engineering
Budgeting for NPD

Finding One Successful New Product
Number Pass Cost

Stage of Ideas Ratio per Idea Total Cost
1. Idea Screening 64 1:4 $1,000 $64,000
2. Concept Testing 16 1:2 20,000 320,000
3. Product Development 8 1:2 200,000 1,600,000
4. Test Marketing 4 1:2 500,000 2,000,000
5. National Launch 2 1:2 5,000,000 10,000,000
$13,984,000
Organizing New Product Development
Cross-functional Teams
“Skunkworks”
Stage-gate Systems

New-Product Decision Process

Generating Ideas
Employees
Crowd Sourcing
Competitors Lead Users

Creativity Techniques
Mind Mapping
Forced
Relationships
Morphological
Analysis
Lateral Marketing
Attribute Listing

Ideas – Screening
Product Success Relative Product Product Rating
Requirements Weight (a) Score (b) (c=a x b)
Unique or superior product .40 .8 .32
High performance-to-cost ratio .30 .6 .18
High marketing dollar support .20 .7 .14
Lack of strong competition .10 .5 .05
Total 1.00 .69
Probability of Probability of
Overall Probability
commercialization economic
probability of technical
given technical success given
of success completion
completion commercialization

Forces Fighting New Ideas

Concept to Strategy
Concept Development Business Analysis
Marketing Strategy Development

Concept Development
Concept 2
Concept 1 Concept 3

Continuum of Evaluation for Products

Concept Testing
Product Dimensions
1. Communicability and Believability
2. Need level
3. Gap level
4. Perceived value
5. Purchase intention
6. User targets, purchase occasions,
frequency

Conjoint Analysis
Design Elements
• Three package designs (A, B, C)
• Three brand names (K2R, Glory, Bissell)
• Three Prices ($1.19, $1.39, $1.59)
• A possible Good Housekeeping seal (yes, no)
• A possible money-back guarantee (yes, no)


Marketing Strategy Development
Target Market’s
• Size
• Structure
• Behavior
Marketing-mix strategy
Marketing Mix

Business Analysis
Estimating Costs and Profits

Estimating Total Sales

PLC Sales for Three Types of Products

Development to Commercialization
Product Development
Market Testing
Commercialization
Product Development
Physical Prototype
Alpha Testing
(Internal)
Beta Testing
(Customers)
Customer Tests
Market Testing
Sales-Wave
Research
Controlled
Test Marketing
Test Markets
Simulated
Test Marketing

Commercialization
When?
Where?
How?
To Whom?
The Consumer-Adoption Process
Stages in the Adoption Process

The Consumer-Adoption Process
Influencing Factors
• Buyer Readiness
• Personal Influence
• Innovation Characteristics
• Organizations Readiness

Buyer Readiness
Early Majority
Laggards
Innovators
Late Majority
Early Adopters

Innovation Characteristics
Divisibility
Compatibility
Relative Advantage
Complexity Communicability
Tapping into Global Markets
1. What factors should a company review
before deciding to go abroad?
2. How can companies evaluate and select
specific foreign markets to enter?
3. What are the differences between marketing
in a developing and a developed market?
4. What are the major ways of entering a
foreign market?

5. To what extent must the company adapt its
products and marketing program to each
foreign country?
6. How do marketers influence country-of-origin
effects?
7. How should the company manage and
organize its international activities?

Competing on a Global Basis
Otis Elevator
Door system – France
Small gear parts – Spain
Electronics – Germany
Motor drives – Japan
Systems integration – U.S.

Deciding whether
to go abroad
Deciding which
Decisions in markets to enter
International Deciding how to

enter the market
Marketing
Deciding on the
marketing program
Deciding on the
marketing organization

Deciding Whether to Go Abroad
Reduce single market dependency
Higher profit potential

Customers going abroad
Economies of scale
Counterattack
competitors

Risks of Going Abroad
Lack:
• An understanding of foreign preferences
• An understanding foreign business culture
• Experienced managers
Underestimate:
• Foreign regulations
Foreign country may:

• Change commercial laws
• Devalue its currency
• Undergo political revolution
The Internationalization Process
Independent
Representatives
Establish sales subsidiaries
Establish production facilities

Deciding Which Markets to Enter
How many markets
Evaluating potential markets
Developed versus
developing markets

Regional Trade Areas
NAFTA
European Union
APEC
ASEAN
MERCOSUR
Deciding How to Enter the Market
Joint
Export
Venture
Direct
Licensing
Investment
Direct Investment
Commitment, Risk, Control, and Profit Potential

Joint Ventures
Five Modes of
Entry into Licensing
Foreign Markets
Direct Exporting
Indirect Exporting

Indirect and Direct Export
Indirect
Direct
Licensing
Management
Contracts
Contract
Manufacturing
Franchising
Joint Ventures & Direct Investment
Joint Venture
Direct Investment
Deciding on the Marketing Program
Global Similarities and Differences
Marketing Adaptation
Global Product Strategies
Global Communication Strategies
Global Pricing Strategies
Global Distribution Strategies

Standardized Marketing
Pros and Cons
Advantages Disadvantages
• Economies of scale Ignores differences in:
• Lower marketing costs • Consumer needs, wants,
• Power and scope and usage patterns
• Brand Consistency • Consumer response
• Leverage ideas quickly and • Brand and product
efficiently development
• Uniformity of marketing • Legal environment
practices • Marketing institutions
• Administrative procedures
Global Similarities and Differences
Soft Drink Consumption
(8-ounce servings)
Americans 760
Mexicans 674
Brazilians 315
Russians 149
Chinese 39
Median Age
25 43
China, India Germany, Italy, & Japan
Cultural Differences
Masculine versus feminine Collectivism
Individualism
Power distance
Uncertainty avoidance
Consumer Behavior Differences
Honda Automobiles
Japan – Speed, youth, and energy

U.S. – Quality and reliability Heineken
U.S. - Super Premium

Netherlands - Mid-tier

Marketing Adaptation
Product Communications
Distribution Price

Global Product Strategies
Product Standardization
Product Adaptation Strategies
Brand Element Adaptation

International Product and
Communication Strategies

Classic Blunders in Global Marketing
Hallmark Coca-Cola
(France) (Spain) Pop-Tarts
(Britain)
Phillips
(Japan)
Crest
(Mexico)
Tang
(France)

Global Distribution Strategies
Channel Entry
Channel Differences
Seller
Seller’s marketing
Whole-Channel headquarters
Concept for
Channels between
International nations
Marketing Channels within
foreign nations
Final buyer

Country-of-Origin Effects
Building Country Images

Country-of-Origin Effects
Consumer Perceptions
Ford Mustang
Toyota Sienna
Ethnocentric
Which is More American?
Ford Mustang
Toyota Sienna

Marketing Organization
Export Department
International Division
Global Organization
Managing a Holistic Marketing
Organization for the Long Run
1. What are important trends in marketing
practices?
2. What are the keys to effective internal
marketing?
3. How can companies be responsible social
marketers?
4. How can a company improve its marketing
skills?
5. What tools are available to help companies
monitor and improve their marketing
activities?
Trends in Marketing Practices
Globalization Deregulation
Market Fragmentation
Environmental
Consumer
Concerns
Empowerment
Internal Marketing
Marketing Departments
• Organizing
• Working with others
• Foster creativity

Functional Organization

Organizing the Marketing Department
Functional Organization
Geography
Market-Management
Matrix-Management
Product- or Brand- Management

The Product
Manager’s
Interactions

Three Types of Product Teams

Relationships w/Other Departments

Creative Marketing Organizations

Socially Responsible Marketing
Ethics Values
Sustainability
Cause Related Marketing
Cause Related Marketing
$0.75
$4.99
Social Marketing
• Just Say No!
• Buckle up for Safety
Millennial Data Points
85% likely to switch to brand linked to

a good cause
86% consider a company’s social commitments

before making recommendations

before deciding where to shop

when deciding where to work

Marketing Implementation
What
Strategy
Why
Who
Where
Implementation
When
How
Marketing Control
Annual-Plan
Profitability
Efficiency
Strategic
The Control Process
What do we want to
Goal Setting
achieve?
Performance
Measurement What is happening?
Performance
Diagnosis Why is it happening?
Corrective What should we do

Action
about it?

The Marketing Audit
Marketing Environment
Marketing Strategy • Comprehensive

• Systematic
Marketing Organization • Independent
• Periodic
Marketing Systems
Marketing Productivity
Marketing Functions
The Future of Marketing

Creating Successful Long Term Growth

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WEEK 12 & 13:

Types of New Products

New Product Success

New Product Failure

Budgeting for NPD

Number Pass Cost

2. Concept Testing 16 1:2 20,000 320,000

3. Product Development 8 1:2 200,000 1,600,000

4. Test Marketing 4 1:2 500,000 2,000,000

5. National Launch 2 1:2 5,000,000 10,000,000

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Competitors Lead Users

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Concept Development Business Analysis

Marketing Strategy Development

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Estimating Costs and Profits

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International Deciding how to

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Higher profit potential

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Foreign country may:

Establish sales subsidiaries

Establish production facilities

Evaluating potential markets

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Commitment, Risk, Control, and Profit Potential

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Global Similarities and Differences

Global Product Strategies

Global Communication Strategies

Global Pricing Strategies

Global Distribution Strategies

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Japan – Speed, youth, and energy

U.S. - Super Premium

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Brand Element Adaptation

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