Principles of Marketing

Chapter 9- Developing and Managing

Offerings

New Offering Development Process

Idea Generating
Idea Screening
Feature Specification
Development
Testing
Launch
Evaluation
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Idea Generation
Basic idea is created and described
Can be a shift or improvement on a current product
Apple computer/Xerox Star
Dyson/Other vacuums

Idea Generation
Basic idea is created and described
Can be a new invention from employees since they
are constantly around the product
Machine shop friend percentage of sales example

Idea Generation
Basic idea is created and described
Can come from customers since they are in
constant contact with your product (cocreation
again)
Trouble is who to listen to

Lead users are those customers who are good at

generating new product ideas and applications

Idea Generation
Basic idea is created and described
Can come from suppliers since they too are
involved in the process
Corrugate crossbar accidental redesign example

Idea Generation
Basic idea is created and described
Can come from competitors
Most tech companies do this. When one innovates, the
others copy.

Idea Screening
Not all ideas are good (in fact, most arent)
Meatwater
New Coke
Chevy Colorado

Idea Screening
The point of idea screening is to weed-out the
bad ideas early.
The longer the idea goes in the process, the
greater cost

Idea Screening
This step attempts to answer the following
questions:
Does the proposed product add value for the
customer? Does it satisfy a market need?

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Idea Screening
This step attempts to answer the following
questions:
Can the product be made within a stated time
period to make it to market when needed?
This is especially important with the fast-paced world
of today.
Imagine being on the 50 Shades bandwagon and not
having your product shipped to stores before April.

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Idea Screening
This step attempts to answer the following
questions:
How many units of it will sell and at what price?
If we are only going to sell a small amount of units, is it
worth the effort? (this is completely situational)
It may be beneficial in the long-run to offer something at a loss
to keep consumers happy
Beat the Pro example

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Idea Screening
This step attempts to answer the following
questions:
Can we manufacture and sell the product within
budget and still make money?
Sometimes there is demand, there is the ability to
supply, but the margins just arent there
Generally a question in a competitive market since prices are
lower which is generally associated with lower margins

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Idea Screening
This step attempts to answer the following
questions:
Do we need to provide the customer with aftersales service? If so, do we have the resources to do
that?
This depends on the product. High-end refrigerator,
probably a good idea. Dishwasher, probably not.
This is also a strategy question since, as service
increases, so does the cost.

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Idea Screening
This step attempts to answer the following
questions:
Does the product fit out image and corporate
strategy?
Ford adding a new line of trucks versus adding a line of
smaller racing style cars. Same question for Suzuki

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Idea Screening
Concept testing
Running the idea by possible consumers
Focus groups- small group with open dialogue
Depth interviews- generally done with individuals to
find a greater amount of information
Should be taken for a grain as sometimes consumers arent
truthful or will try to make something out of nothing
Consumers will say they like something when they dont
just because they dont want to be negative
Consumers will say what they think the researcher wants
to hear to be compliant
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Idea Screening
Process feasibility
The degree to which the company can actually
make and service the product
McDonalds making farm-to-table food (strategic fit)
Friend the knife maker and chefs knives

A direct tie to financial feasibility or the ability of

the offering to make money

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Idea Screening
Types of risk at this point

Investment risk- will the company make the

appropriate return on the money and effort
Opportunity risk- risk that there is a better product
being ignored due to investment in in this idea
Focusing on MiniDisks (1992) instead of MP3 (1995)

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Feature Specification
This step is to narrow down the
products features
This could be just getting one product
with the correct mix, or setting the
features for the different price points

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Feature Specification
Quality function deployment (QFD)
Starts with consumers desires then designs the
offering based on these desires
Often this is very difficult
Running watch example

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Development
Actual design of the offering starts
Specs, prototypes are created, feasibilities are
determined
How similar do we make it to the previous versions?
XBone, looking at you (really, no backwards compatibility?)
iPhones, what does the next iteration actually get you?

How do we deal with spec problem?

Consumers want 3 terabytes in their phoneshow?

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Testing
Offering is actually created and started testing
Alpha testing is lab testing and possibly a very
select group of consumers
Friend with food altitude problems

Beta testing is consumers using offering in realworld conditions

Sometimes this step is skipped and the market decides
what changes need to be made (iPhone 4?)

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Launch or Commercialization
All tests are run, decisions have been made,
now its time to introduce the product to the
market
Rolling launch- releasing across markets one
by one
If this is an international offering, it could be by
country
If just one country, it could be regional
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Launch or Commercialization
If a company tests a complete launch of a
product, it is a market test
Market tests are designed to ensure that it reaches
buyers, gets positive reactions, and generates sales
Tulsa, OK being very average

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Evaluation
Per the usual, we need some metric to
determine the success or failure of an offering
Box office numbers from first week
A good indicator of future sales
Can lead to decisions on increasing promotions, pulling
advertising, etc. (both for the movie in theatres and later
for the release)

Sell-through rate was my best indicator for best

seller, but awful for other categories
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Managing New Products: PLC

Product life cycle
All products have a life cycle unique to themselves
The stages are similar to life-phases and equally as
dynamic
Depending on the stage, a firm has different
objectives, obligations, and options.

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Managing New Products: PLC

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Managing New Products: PLC

PLC for Coke versus PLC for Zhu Zhu pets (2009)

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Introduction Stage
Marketing costs are higher than other stages
(since no one has heard of this before)
Good analogy is the space shuttle fuel requirement
at launch

Profits are generally low in this stage since

R&D costs need to be recouped and
advertising and promotion are very high

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Introduction Stage
Like all stages, the time a product spends in the
introduction stages is unique to the firm
Law states that the term new can only be used on a
product for six months

In a fad market, this is probably very steep since it

takes off in the market
In a commoditized market, this is probably a long,
shallow slope since consumers will need more time
to accept the new offering since other brands are
already at the top of their mind
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Introduction Stage
Like all stages, the time a product spends in the
introduction stages is unique to the firm
Law states that the term new can only be used on a
product for six months

In a fad market, this is probably very steep since it

takes off in the market
In a commoditized market, this is probably a long,
shallow slope since consumers will need more time
to accept the new offering since other brands are
already at the top of their mind
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Introduction Stage
In this stage, distribution is paramount since
demand can be high and there may not be a
second attempt at a second chance
Autohammer out at *store* and my never making
a purchase

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Introduction Stage
It is rare in this stage to start making a profit
Most all up-front costs are still being recouped, but
that isnt a reason to abandon the product. It is a war
of attrition to some degree, especially depending on
the pricing strategy
Penetration pricing- offering a low price initially to
capture market share. Commodities
(Different than predatory since predatory is below cost)

Skimming pricing- Set prices high to recoup costs

early. High-end products
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Growth Stage
Once a product is accepted, it enters the
growth stage
Increase in sales now that there is a demand
Recouping of costs can occur since sales increase
Similarly, some profits may be had
Drawback is more competition
This is especially true in innovative products

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Growth Stage
Promotions change in this stage from an
introduction to a focus on benefits
Introduction- Hey, we exist!
Growth- Here is how we are better than the
competition

Increase in distribution as more outlets are

interested in the offering.
This increase is where some of the possibilities are
going
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Maturity Stage
As the market reaches an equilibrium, new
customers decline, sales begin leveling off,
competitors leave, and the maturity stage
begins
Here, most purchases are repeat customers
Number of firms generally falls to between
one and five*
How many processor companies are there?
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Maturity Stage
Marketing focuses on developing new
strategies by finding new consumers, new
product uses, and other changes in previous
strategies.
100 calorie packs (downsizing)

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Maturity Stage
New markets abroad
Fast food in developing countries
Must determine if the product should be
standardized or adapted
Standardized is the product staying the same across
markets
Commoditized products (like steel beams)

Adapted is changing the product to meet the needs of

the local culture
Big Macs around the world
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Decline Stage

Sales decrease continuously

Can be due to: technology changes
Preference changes
Better alternatives

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Decline Stage
Strategies for decline stage
Harvesting- gradually reducing all costs spent on
the offering. Ideally, this means that investments
and inventory shrink and margins grow.
Decline stage doesnt have to mean that the offering
isnt profitable
Riding out the demand example

Divesting- Get rid of a product, service, or

business (cut losses)

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Stages
Where do the following offerings fit into the
PLC?
Apple iPod

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Stages

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Stages
Where do the following offerings fit into the
PLC?
Diet Coke

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Stages

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Stages
Where do the following offerings fit into the
PLC?
Coke

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Stages

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Stages
Where do the following offerings fit into the
PLC?
Epson Printers

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Stages

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Stages
Where do the following offerings fit into the
PLC?
Tesla Cars

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Stages

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Stages
Where do the following offerings fit into the
PLC?
Google Glass

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Stages

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Stages
Where do the following offerings fit into the
PLC?
Ninja Blender

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Stages

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Stages
Where do the following offerings fit into the
PLC?
Oculus Rift

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Stages

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