Introducing New Market Offerings.

faaiz

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Chapter 20 : Introducing New Market Offerings.

Challenges in New-Product Development
The company can develop new products in its own laboratories, or it can contract with independent researchers or new-product development firms to develop specific new products. We can identify six categories of new products.
1. New-to-the-world products
2. New product lines
3. Additions to exiting product lines
4. improvements and revisions of existing products
5. Repositioning
6. Cost reductions

Principles to guide New-product Development
1. Work with potential customers
2. Let employees choose projects
3. Give employees “dabble” time
4. Know when to let go.
Most established companies focus on Incremental innovation. Never companies create disruptive technologies that are cheaper and more likely to alter the competitive space. Established companies can be slow to react or invest in these disruptive technologies because they threaten their investment.



Factors hinder new-product development:
• Shortage of important ideas in certain areas
• Fragmented markets
• Social and governmental constraints
• Cost of development constraints
• Cost of development
• Capital shortages
• Faster required development time
• Shorter product life cycles


Organizational Arrangements
Once a company has carefully segmented the market, chosen its target customers, identified their needs, and determined its market positioning, it is better able to develop new products. Many companies today use customer-driven engineering to design new products. Customer-driven engineering attaches high importance to incorporating customer preferences in the final design.
Organizing New-Product Development
A venture team is a cross-functional group charged with developing a specific product or business. These “intrapreneurs” are relieved of their duties and given a budget, garages, where intrapreneurial teams attempt to develop new products.
Cross functional teams help to ensure that engineers are not just driven to create a “better mousetrap” when potential customers do not really need or want one. Some possible criteria for staffing cross-functional new-product venture teams include:
• Desired team leadership style and level of expertise
• Team member skills and expertise
• Level of interest in the particular new-product concept
• Potential for personal reward
• Diversity of teams members

Managing the Development Process: IDEAS
Idea Generation
The new-product development process starts with the search for ideas. New-product ideas can come from interacting with various groups and from using creativity-generating techniques.
Interaction with Others
Ideas for new products can come from many sources, such as customers, scientists, competitors, employees, channel members, and top management. Many companies are not restricting their search for new products and services only to their formal research and development departments. To generate innovative ideas, companies need ‘out-of-the-box’ thinking, open forums, and a wider search.
Creativity Techniques
Here the Sampling techniques for stimulating creativity in individuals and groups.
• Attribute Listing: Attribute listing and modifying of an object, such as a screwdriver and replacing the wooden handle with plastic, providing torque power, adding different screw heads, and so on.
• Forced relationship: Several ideas are considered and each one on relation to each other one.
• Morphological analysis: It starts with a problem and than think of the dimensions.
• Reverse assumption analysis: All the normal assumptions about equity are listed and then they are reversed.
• New contexts: Take familiar processes, such as people-helping services, and put them into a new context.
• Mind mapping: It starts with a thought and link another thought and think of next association and do this with all association and materialize a new idea.

Idea Screening
A company should motivate its employees to submit new ideas to an idea manager whose name and phone number are widely circulated. Ideas should be written down and reviewed each week by an idea committee. The company then sorts the proposed ideas onto three groups: promising ideas, marginal ideas, and rejects. Each promising idea is researched by a committee member, who reports back to the committee. The surviving ideas then move into a full- scale screening ideas, the company must avoid a drop error and go error.


Managing the Development Process: Concept to Strategy
Attractive ideas must be refined into testable product concepts. A product is a possible product the company might offer to the market. A product concept is an elaborated version of the idea expressed in consumer terms.
Concept Development and Testing
Concept Development
Consumer do not buy product ideas, they buy product concepts. A product idea can be turned into several concepts. The first question is: Who will use this product. Second What primary benefit should this product provide? Third, when will people consume this?
Each concept represents a category concept that defines the product’s competition. The next task is to show where this product would stand in relation to other breakfast products by product-positioning map and by brand concept.
Concept Testing:
Concept testing involves presenting the product concept to target consumers and getting their reactions. The concepts can be presented symbolically or physically. The more the tested concepts resemble the final product or experience, the more dependable concept testing. Today firms can use rapid prototyping, virtual reality to test product concept.
Concept Analysis:
Consumer preferences for alternative product concepts can be measured through conjoint analysis, a method for deriving the utility values that consumers attach to varying levels of a product’s attributes. Respondents are shown different hypothetical offers. Management can identify the most appealing offer and the estimated market share and profit the company might realize.

Marketing Strategy
Following a successful concept test, the new-product manager will develop a preliminary strategy plan for introducing the new product into market. The plan consists of three parts. The first part describes the target market’s size structure, and behavior; the planned product positioning; and the sales, market share, and profit goals sought in the first few years.
The second part outlines the planned price, distribution strategy, and marketing budget for the first year.
The third part of the marketing-strategy plan describes the long-run sales and profit goals and marketing-mix strategy over time.

Business Analysis
After management develops the product concept and marketing-strategy, it can be evaluate the proposal’s business attractiveness. Management needs to prepare sales, cost, and profit projections to determine whether they satisfy company objectives. If they do, the concept can move to the development stage. As new information comes in, the business analysis will undergo revision and expansion.


Managing the Development Process: Development to Commercialization
Product Development
The job of translating target customer requirements into a working prototype is helped by a set of methods known as quality-function development. A major contribution of QFD is that it improves communication between marketers, engineers, and the manufacturing people.
Physical Prototype
The R&D department will develop one or more physical versions of the product concept. Lab scientists must not only design the product’s functional characteristics, but also communicate its psychological aspects through physical cues.
Customer Tests
When the prototype are ready, they must be put through rigorous functional tests and consumer tests. Alpha testing is the name given to testing the product within the firm. Consumer preferences are measured in several ways.
The rank order
The paired-comparison
The monadic-rating
Market Testing
After management is satisfied with functional and psychological performance, the product is ready to be dressed up with a brand name and packaging, and put into a market test. The new product is introduced into an authentic setting to learn how large the market is and how consumers and dealers react to handling, using, and repurchasing the product. The amount of market testing is influenced by the investment cost and risk on the one hand, and the time pressure and research cost on the other.
Consumer-Goods Market Testing
In testing consumer products, the company seeks to estimate four variables: trial, first repeat, adoption, and purchase frequency.
The four major methods of consumer-goods market testing are as follows:
Sales-Wave Research
Simulated Test Marketing
Controlled Test Marketing
Test Markets
Business-Goods Market Testing:
Expensive industrial goods and new technologies will normally undergo alpha testing (within the company) and beta testing ( with outside customers). During beta testing, the vendor’s technical people observe how test customers use the product, a practice that often exposes unanticipated problems of safety and servicing and alerts the vendor how much value the training and servicing requirements. The second common test method for business goods is to introduce the new product at trade shows. The vendor can observe how much interest buyers show in the new product, how they react to various features and terms, and how many express purchase intentions or place orders.
Commercialization
If the company goes ahead with commercialization, it will face its larger costs to date. The company will have to contract for manufacture or build or rent a full-scale manufacturing facility. Plant size will be a critical decision.
Where (Geographic Strategy)
The company must decide whether to launch the new product in a single locality; a region; several regions, the national market, or the international market. Most companies design new products to sell primarily in the domestic market. If the product does well, the company considers exporting to neighboring countries or the world market, redesigning if necessary
To whom (Target Market Prospects)
Within the rollout markets, the company must target its initial distribution and promotion to the best prospect groups. Presumably, the company has already profiled the prime prospects, who would ideally have the following characteristics: they would be early adopters, heavy users, and opinion leaders, and they could be reached at a low cost.
How (Introductory Market Strategy)
The company must develop an action plan for introducing the new product into the rollout markets. To coordinate the many activities involved in launching a new product, management can use network-planning techniques such as critical path scheduling .
The Consumer-Adoption Process
Adoption is an individual’s decision to become a regular user of a product. The consumer adoption process is later followed by the consumer-loyalty process, which is the concern of the established producer.
Stages in Adoption Process
1. Awareness
2. Interest
3. Evaluation
4. Trial
5. Adoption

Factors Influencing the Adoption Process
Readiness to try new products and personal influence
Innovators are technology enthusiasts; they are venturesome and enjoy tinkering with new products and mastering their intricacies.
Early adopters are opinion leaders who carefully search for new technologies that might give them a dramatic competitive advantage.
Early majority are deliberate pragmatists who adopt the new technology when its benefits are proven and a lot of adoption has already taken place.
Late majority are skeptical conservatives who are risk averse, technology shy, and price sensitive.
Laggards are tradition-bound and resist the innovation until they find that the status quo is no longer defensible.
Personal influence is the effect one person has on another’s attitude or purchase probability.


Characteristics of the Innovation.
Relative Advantage
Compatibility
Complexity
Divisibility
Communicability.
 
Chapter 20 : Introducing New Market Offerings.

Challenges in New-Product Development
The company can develop new products in its own laboratories, or it can contract with independent researchers or new-product development firms to develop specific new products. We can identify six categories of new products.
1. New-to-the-world products
2. New product lines
3. Additions to exiting product lines
4. improvements and revisions of existing products
5. Repositioning
6. Cost reductions

Principles to guide New-product Development
1. Work with potential customers
2. Let employees choose projects
3. Give employees “dabble” time
4. Know when to let go.
Most established companies focus on Incremental innovation. Never companies create disruptive technologies that are cheaper and more likely to alter the competitive space. Established companies can be slow to react or invest in these disruptive technologies because they threaten their investment.



Factors hinder new-product development:
• Shortage of important ideas in certain areas
• Fragmented markets
• Social and governmental constraints
• Cost of development constraints
• Cost of development
• Capital shortages
• Faster required development time
• Shorter product life cycles


Organizational Arrangements
Once a company has carefully segmented the market, chosen its target customers, identified their needs, and determined its market positioning, it is better able to develop new products. Many companies today use customer-driven engineering to design new products. Customer-driven engineering attaches high importance to incorporating customer preferences in the final design.
Organizing New-Product Development
A venture team is a cross-functional group charged with developing a specific product or business. These “intrapreneurs” are relieved of their duties and given a budget, garages, where intrapreneurial teams attempt to develop new products.
Cross functional teams help to ensure that engineers are not just driven to create a “better mousetrap” when potential customers do not really need or want one. Some possible criteria for staffing cross-functional new-product venture teams include:
• Desired team leadership style and level of expertise
• Team member skills and expertise
• Level of interest in the particular new-product concept
• Potential for personal reward
• Diversity of teams members

Managing the Development Process: IDEAS
Idea Generation
The new-product development process starts with the search for ideas. New-product ideas can come from interacting with various groups and from using creativity-generating techniques.
Interaction with Others
Ideas for new products can come from many sources, such as customers, scientists, competitors, employees, channel members, and top management. Many companies are not restricting their search for new products and services only to their formal research and development departments. To generate innovative ideas, companies need ‘out-of-the-box’ thinking, open forums, and a wider search.
Creativity Techniques
Here the Sampling techniques for stimulating creativity in individuals and groups.
• Attribute Listing: Attribute listing and modifying of an object, such as a screwdriver and replacing the wooden handle with plastic, providing torque power, adding different screw heads, and so on.
• Forced relationship: Several ideas are considered and each one on relation to each other one.
• Morphological analysis: It starts with a problem and than think of the dimensions.
• Reverse assumption analysis: All the normal assumptions about equity are listed and then they are reversed.
• New contexts: Take familiar processes, such as people-helping services, and put them into a new context.
• Mind mapping: It starts with a thought and link another thought and think of next association and do this with all association and materialize a new idea.

Idea Screening
A company should motivate its employees to submit new ideas to an idea manager whose name and phone number are widely circulated. Ideas should be written down and reviewed each week by an idea committee. The company then sorts the proposed ideas onto three groups: promising ideas, marginal ideas, and rejects. Each promising idea is researched by a committee member, who reports back to the committee. The surviving ideas then move into a full- scale screening ideas, the company must avoid a drop error and go error.


Managing the Development Process: Concept to Strategy
Attractive ideas must be refined into testable product concepts. A product is a possible product the company might offer to the market. A product concept is an elaborated version of the idea expressed in consumer terms.
Concept Development and Testing
Concept Development
Consumer do not buy product ideas, they buy product concepts. A product idea can be turned into several concepts. The first question is: Who will use this product. Second What primary benefit should this product provide? Third, when will people consume this?
Each concept represents a category concept that defines the product’s competition. The next task is to show where this product would stand in relation to other breakfast products by product-positioning map and by brand concept.
Concept Testing:
Concept testing involves presenting the product concept to target consumers and getting their reactions. The concepts can be presented symbolically or physically. The more the tested concepts resemble the final product or experience, the more dependable concept testing. Today firms can use rapid prototyping, virtual reality to test product concept.
Concept Analysis:
Consumer preferences for alternative product concepts can be measured through conjoint analysis, a method for deriving the utility values that consumers attach to varying levels of a product’s attributes. Respondents are shown different hypothetical offers. Management can identify the most appealing offer and the estimated market share and profit the company might realize.

Marketing Strategy
Following a successful concept test, the new-product manager will develop a preliminary strategy plan for introducing the new product into market. The plan consists of three parts. The first part describes the target market’s size structure, and behavior; the planned product positioning; and the sales, market share, and profit goals sought in the first few years.
The second part outlines the planned price, distribution strategy, and marketing budget for the first year.
The third part of the marketing-strategy plan describes the long-run sales and profit goals and marketing-mix strategy over time.

Business Analysis
After management develops the product concept and marketing-strategy, it can be evaluate the proposal’s business attractiveness. Management needs to prepare sales, cost, and profit projections to determine whether they satisfy company objectives. If they do, the concept can move to the development stage. As new information comes in, the business analysis will undergo revision and expansion.


Managing the Development Process: Development to Commercialization
Product Development
The job of translating target customer requirements into a working prototype is helped by a set of methods known as quality-function development. A major contribution of QFD is that it improves communication between marketers, engineers, and the manufacturing people.
Physical Prototype
The R&D department will develop one or more physical versions of the product concept. Lab scientists must not only design the product’s functional characteristics, but also communicate its psychological aspects through physical cues.
Customer Tests
When the prototype are ready, they must be put through rigorous functional tests and consumer tests. Alpha testing is the name given to testing the product within the firm. Consumer preferences are measured in several ways.
The rank order
The paired-comparison
The monadic-rating
Market Testing
After management is satisfied with functional and psychological performance, the product is ready to be dressed up with a brand name and packaging, and put into a market test. The new product is introduced into an authentic setting to learn how large the market is and how consumers and dealers react to handling, using, and repurchasing the product. The amount of market testing is influenced by the investment cost and risk on the one hand, and the time pressure and research cost on the other.
Consumer-Goods Market Testing
In testing consumer products, the company seeks to estimate four variables: trial, first repeat, adoption, and purchase frequency.
The four major methods of consumer-goods market testing are as follows:
Sales-Wave Research
Simulated Test Marketing
Controlled Test Marketing
Test Markets
Business-Goods Market Testing:
Expensive industrial goods and new technologies will normally undergo alpha testing (within the company) and beta testing ( with outside customers). During beta testing, the vendor’s technical people observe how test customers use the product, a practice that often exposes unanticipated problems of safety and servicing and alerts the vendor how much value the training and servicing requirements. The second common test method for business goods is to introduce the new product at trade shows. The vendor can observe how much interest buyers show in the new product, how they react to various features and terms, and how many express purchase intentions or place orders.
Commercialization
If the company goes ahead with commercialization, it will face its larger costs to date. The company will have to contract for manufacture or build or rent a full-scale manufacturing facility. Plant size will be a critical decision.
Where (Geographic Strategy)
The company must decide whether to launch the new product in a single locality; a region; several regions, the national market, or the international market. Most companies design new products to sell primarily in the domestic market. If the product does well, the company considers exporting to neighboring countries or the world market, redesigning if necessary
To whom (Target Market Prospects)
Within the rollout markets, the company must target its initial distribution and promotion to the best prospect groups. Presumably, the company has already profiled the prime prospects, who would ideally have the following characteristics: they would be early adopters, heavy users, and opinion leaders, and they could be reached at a low cost.
How (Introductory Market Strategy)
The company must develop an action plan for introducing the new product into the rollout markets. To coordinate the many activities involved in launching a new product, management can use network-planning techniques such as critical path scheduling .
The Consumer-Adoption Process
Adoption is an individual’s decision to become a regular user of a product. The consumer adoption process is later followed by the consumer-loyalty process, which is the concern of the established producer.
Stages in Adoption Process
1. Awareness
2. Interest
3. Evaluation
4. Trial
5. Adoption

Factors Influencing the Adoption Process
Readiness to try new products and personal influence
Innovators are technology enthusiasts; they are venturesome and enjoy tinkering with new products and mastering their intricacies.
Early adopters are opinion leaders who carefully search for new technologies that might give them a dramatic competitive advantage.
Early majority are deliberate pragmatists who adopt the new technology when its benefits are proven and a lot of adoption has already taken place.
Late majority are skeptical conservatives who are risk averse, technology shy, and price sensitive.
Laggards are tradition-bound and resist the innovation until they find that the status quo is no longer defensible.
Personal influence is the effect one person has on another’s attitude or purchase probability.


Characteristics of the Innovation.
Relative Advantage
Compatibility
Complexity
Divisibility
Communicability.

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