DEVELOPING NEW MARKET

OFFERINGS
Marketing management
 Developing new market offerings
• Challenges of NPD
• Organization structure to manage NPD
• Stages of NPD
• Rates of diffusion & consumer adoption of
newly launched products
 Booz, Allen, & Hamilton’s 6
categories of new products
1. New to the world
2. New product lines
3. Addition to existing product lines
4. Improvement & addition to existing products
5. Repositioning
6. Cost reduction
LESS THAN 10% OF ALL NEW PRODUCTS TRULY
INNOVATIVE & NEW TO THE WORLD
 Challenges to new product
development
• Failure > 90%
• Why new products fail?
• Factors hindering new product development
• Cooper & Kleinschimdt: successful NPD
• Unique superior product
 Organization structures to make
new products successful
• Budgeting for NPD
• Organizing NPD
• Organization aspects of NPD:
– Product managers
– High level management committees
– Venture teams – intra-preneurs
– Skunk work setting
– Stage gate system
 Finding new successful products
(starting with 64 new ideas)
Stage No. of Pass Cost per Total cost($)
ideas ratio product idea
($)
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

13,000,000
 Product-idea rating device
Relative Product Product rating
weight score

Product success requirements (a) (b) (c= a x b)

Unique or superior product .40 .8 .32
High performance-to-cost ratio .30 .6 .18

High market dollar support .20 .7 .14

Lack of strong competition .10 .5 .05

1.00

Rating scale: .00 - .30: poor; .31 - .60: good;

Minimum acceptance .61
 NPD decision process
Lay future
yes plans
Yes Yes Yes Yes Yes Yes Yes
1.Idea 2. idea 3. Concept 4. Marketing 5. Business 6.Product 7.Market 8 Commercialization
generation screening development strategy analysis development testing
& testing development

Is the is the can we find can we find will this have we got have are product sales
Idea worth product a good a cost-effect- product a technically product meeting Yes
consider- idea com- concept ive, affordable meet & commer- sales met expectations?
Ing? patible consumers marketing our profit cially sound expect-
with co. say they strategy? goal? product? ations?
objectives would try?
strategies,
resources?

send the modify the product

idea back or marketing prog-
for product ramme?
No No No No No No development

No No
Drop
 Factors affecting rate of diffusion & consumer
adoption of newly launched products
ADOPTION IS AN INDIVIDUALS DECISION TO
BECOME A REGULAR USER OF THE PRODUCT

Stages in adoption process:

1. Awareness
2. Interest
3. Evaluation
4. Trial
5. Adoption
 Adopters categorize on the basis of
relative time of adoption of innovations

34% 34%
Early Late
majority majority
16%
Laggards
13.5%
2.5% Early
innovators adopters

Time of adoption of innovation

 Factors affecting adoption process
• Rogers sees 5 adopter groups differing in
value orientation:
1. Innovators: venturesome
2. Early adopters: guided by respect; opinion leaders
adopt new ideas carefully
3. Early majority: deliberate
4. Late majority: skeptical, only after majority tried
5. Laggards: tradition bound; suspicious; only when
innovation takes place on tradition
 Characteristics of innovation
1. Relative advantage
2. Compatibility
3. Complexity
4. Divisibility
5. Communicability
 Estimating total sales
PLC: Sales of 3 types of products Repeat purchase
sales
Replacement sales

Sales
sales
Sales

Time Time
Time

(a) One time (b) Infrequently © Frequently purchased

purchase product Purchased product product