New Product Development and Marketing of Business Services

Overview

How new products are classified? What are the success and failure factors of new products? What is the process of new product development? What are product development management (PDM) and product lifecycle management (PLM) concepts? What is the relationship between innovation, competitiveness, and technology? What is high-tech marketing and its strategy? What is the importance of product and service quality? How business services are classified? What are their characteristics and marketing implications? What are the marketing strategies for business service firms?

What is a New Product?

A product that is new to the market and to the company is a new product. They are classified as: Innovative and new to the market / world. New to the company, not new to the market. Major improvements to existing products. Additions to existing product lines. Repositioning existing product to new market segment. Substantial cost reductions without affecting performance.

Success Factors of New Products

Product superiority or uniqueness Market knowledge or marketing effectiveness Technical and production capabilities Cross functional team work

Factors Responsible for Failure of New Products

Not satisfying the needs of customers Similar to exiting products Not delivering expected performance Have weak process of new product development ??? High prices higher than customers expectations

New Product Development (NPD) Process

The NPD process has seven stages:

Idea generation Idea screening Concept development and testing Business analysis Product development Market testing Commercialization

New Product Development (NPD) Process (continued)

Idea Generation: Major sources of new product ideas (NPIs) are:

Customers : by solving their problems Employees: by brainstorming and attribute listing Suppliers and intermediaries ??

Idea Screening (select likely to succeed ideas). Done in two stages:

If the NPI gets positive answers to certain questions, then it goes to second stage: Where the firms capabilities are rated for NPI with respect to marketing, production, R & D, supplies, finance, company objectives

New Product Development (NPD) Process (continued)

Idea Screening (questions for which positive answers

required are): Will new product be in line with Co objective & strategies? Are adequate resources (Money, people, skill) available? Does it really provide benefits and solves problems of customers? Does it deliver more value to customers than competing products? What is the future growth, market size, competition likely to be in new product industry?

New Product Idea Rating Formula

New Product Idea Significant Factors 1. Company objective & strategies 2. Marketing experience and effectiveness 3. Production capabilities and facilities 4. Research and Development know-how 5. Availability of raw material and supplies (A) Weightage 0.20 0.20 0.15 0.15 0.10 (B) Capabilities 0.70 0.50 0.40 0.60 0.70 (A x B) Rating 0.14 0.10 0.06 0.09 0.07

6. Financial resources and profitability.

0.20
1.00

0.80

0.16
0.62

Rating scale: Less than 0.4 = Poor; 0.4 0.7 = Fair; Above 0.7 = Good; Minimum acceptance = 0.7 (Has the idea passed or failed?) ??

New Product Development (NPD) Process (continued)

Concept Development and Testing (CDT)

NPI is converted into new product concepts (NPCs) ?? NPCs are presented to prospects, using physical or simulated products, or plastic models. NPC with strongest appeal from prospects is selected

Business Analysis Who & what? Projections for 5-7 years done for the NPI regarding:

Investments in plant, equipment, etc. Sales, customers, competitors Costs of product development, manufacturing, marketing Price levels, profitability, ROI

New Product Development (NPD) Process (continued)

Product Development (PD)

R & D develops prototype of the NPI It should conform to prospects requirements about performance and costs based on CDT. Speed up PD, using concurrent engineering ??

Market Testing: Methods used:

Alfa and Beta testing Trade shows Intermediaries premises Test marketing

NPD Process (conventional development engineering

cycle)

Design

Process Engineering

Tooling

Manufacturing

Testing

Final Product

The above cycle can be reduced by doing concurrent engineering.

New Product Development (NPD) Process (continued)

Commercialization or launching of a NP includes:

a marketing plan and action plan

Action plan has various activities to be completed by the product launch time, such as:

Recruiting, training, product catalogues, price lists, introductory advertisements, adequate stock, customer service and so on

PERT and CPM technique used for timely completion of all activities. ??

Product Development Management (PDM)

PDM should have: Ability to create digital products Cross functional collaboration Managing product information and NPDs Updating digital data

Product Lifecycle Management (PLM)

Change from PDM to PLM has begun PLM is a software solution aimed at delivering fast and quantifiable results. Benefits of PLM software solution:

Reduction in product development (PD) time Minimization of process errors Reduction of PD travel expenses Minimization of time to market / launch

Innovation, Competitiveness, Technology

Innovation is any product, method, service, or idea that is perceived as new by someone. Through continuous innovation some companies differentiate from competitors and gain competitive advantage. Technological innovations create new products and services new to the market.

High Tech Marketing

High Tech includes telecommunications, computers, software, biotech, consumer electronics. Major characteristics differentiating high-tech marketing:

High technological uncertainties High market uncertainties High competitive volatility Short life of high-tech products High development cost

Diffusion of innovation model is slightly modified to understand acceptance of new high tech products called Modified Technology Adoption Life Cycle

Technology Adoption Life Cycle

What is the other nomenclature for each? Innovators: Technology enthusiasts; Early adopters: Visionaries; Early majority: Pragmatists; Late majority: Conservatives; Laggards: Suspicious Why are there gaps in the model? Which is the largest gap?

High Tech Marketing Strategy

What should be the marketing strategy in view of TALC as seen in the previous slide?? Target a niche market. Why?? Electronic book. Plan whole product properties. What is it?? Develop partnerships. Why?? Evolve a unique positioning strategy. Why & how?? Develop an effective integrated marketing communication (IMC) strategy Determine multi-channel distribution strategy ?? Select skimming pricing strategy

Product and Service Quality

Strategic importance to quality ISO, TQM PIMS findings on quality Meaning / definition of quality ?? Measuring service quality (described in next slide)

Reliability Responsiveness Assurance Empathy Tangibles

Role of marketers

Dimensions Used for Measuring Service Quality

Service Dimension Reliability Brief Description Satisfying a promise Examples Promised delivery schedule met

Tangibles

Appearance of Brochures, physical facilities and experienced and personnel qualified service providers
Willingness and ability to provide prompt service. Trust and confidence Treating customers as individuals Quick response to customers complaints. Capable staff. Adapting to the needs of individual customers.

Responsiveness
Assurance

Empathy

Marketing of Business Services

Product Service Classification Examples: Three groups: Pure tangible products Products combined with services Pure intangible service

Industrial Product-Service Classification

Materials and components (e.g. Steel, ball bearings)

Personal computers

Hotels for conferences

Goods transportation

Legal

Pure tangible product

Major product, with minor service
Equal parts of product and service Major service, with minor product

Pure intangible service

Unique Characteristics of Services and Marketing Implications

Intangibility Can not be seen / felt before purchasing Example: Management consultancy, Executive development programmes etc. Tangibilise the intangible thro
people, place, equipment

or infrastructure

Unique Characteristics of Services and Marketing Implications

Inseparability Produced and consumed simultaneously Example: Courier service, Machinery or equipment repair Effective interaction very necessary for buyer-seller interactions
Requires

effective recruitment and training of service providers

Unique Characteristics of Services and Marketing Implications

Variability Quality of services are highly variable depending on who provides, when, and where they are provided. Example: Marketing research, Management education Standardization of output and uniformity in quality are difficult to achieve.

Emphasize quality standards, develop systems to minimize errors, try to automate

Unique Characteristics of Services and Marketing Implications

Perishability Generally services cannot be mass produced and stored. Example: Airlines empty seats, unused warehouse space Difficult problems when demand fluctuates
Plan

capacity around peak demand Use pricing, reservation system, and other methods to achieve closer match between demand and capacity

Unique Characteristics of Services and Marketing Implications

Non-ownership Services buyer uses but does not own the service purchased. Example: Use of hotel/car rental services Marketers should communicate advantages of non-ownership such as:

Reduction in labour and overhead Flexibility

Marketing in Business Service Firms

Christian Gronroos has argued that services marketing not only requires external marketing but also internal and interactive marketing: Internal marketing: Train and motivate employees to ensure superior service to customers. External marketing :Use marketing mix to achieve objectives. Interactive marketing: Describes employees skills in serving customers

Customers perceives quality of service by its technical quality and functional quality.

Marketing Strategies for Business Services

Segmenting and targeting Differentiating the service Developing service package / offer Pricing Promotion Distribution