Marketing’s Role in Marketing’s Role in New Product DevelopmentNew Product Development

October 4, 2006October 4, 2006 AgendaWhy is marketing important?

Product development costs and risks.

Situation Analysis (Uncontrollable Variables): “YourWay” cereal.

10 Minute Break

Marketing Strategy (Controllable Variables) Pepsi One’s product launch.

New Product Development Video: IDEO develops a new shopping cart.

Q&A: After class.

Marketing’s Role in New Product Development

Prof. Bill RobinsonKrannert School of Management

Purdue University

Why is Marketing Important?

Profits = Revenues – Costs

Some Examples

Advertising & personal selling.

Product development.

Pricing.

Start your own business.

Smarter shopper.

Why Will Our Discussion Focus Why Will Our Discussion Focus onon

Consumer Goods, Like SoftConsumer Goods, Like SoftDrinks and Breakfast Cereal?Drinks and Breakfast Cereal?

Easy to understand.Easy to understand.

Marketing principles apply to both Marketing principles apply to both high- tech and low-tech businesses.high- tech and low-tech businesses.

Product Development Costs & Product Development Costs & RisksRisks

““YourWay” Self-Serve CerealYourWay” Self-Serve Cereal

Key ProblemsKey Problems

Key OpportunitiesKey Opportunities

Overall SituationOverall SituationVery Favorable?Very Favorable?Somewhat Favorable?Somewhat Favorable?Neutral?Neutral?Somewhat Unfavorable?Somewhat Unfavorable?Very Unfavorable?Very Unfavorable?

Situation AnalysisSituation Analysis

1) 1) Nature of DemandNature of Demand

Unmet need?Unmet need?

Health conscious consumers?Health conscious consumers?

2) 2) Extent of DemandExtent of Demand

Huge market!Huge market!

Breakeven market share of 1% -2%.Breakeven market share of 1% -2%.

3) 3) CompetitionCompetition

Kellogg’s, General Mills, etc.Kellogg’s, General Mills, etc.

Supermarket bulk foods.Supermarket bulk foods.

4) 4) Environmental ClimateEnvironmental Climate

Political, economic, social, Political, economic, social, technological issues?technological issues?

Situation Analysis (cont.)Situation Analysis (cont.)

5) 5) Product Life CycleProduct Life Cycle

Difficult to enter a mature market.Difficult to enter a mature market.

6) 6) CostsCosts

Higher costs versus competition.Higher costs versus competition.

7) 7) Firm SkillsFirm Skills

Only Ed.Only Ed.

8) 8) Financial ResourcesFinancial Resources

Only Ed.Only Ed.

9) 9) Distribution StructureDistribution Structure

Is Payless ideal?Is Payless ideal?

Floor space?Floor space?

Situation Analysis (cont.)Situation Analysis (cont.)

Overall SituationOverall Situation

Very Favorable?Very Favorable?

Somewhat Favorable?Somewhat Favorable?

Neutral?Neutral?

Somewhat Unfavorable?Somewhat Unfavorable?

Very Unfavorable?Very Unfavorable?

Pepsi Pepsi OneOne Managerial ProblemManagerial ProblemHow to launch Pepsi One?How to launch Pepsi One?

Situation AnalysisSituation AnalysisKey Problems:Key Problems:

Key Opportunities:Key Opportunities:

Overall SituationOverall SituationVery Favorable?Very Favorable?Somewhat Favorable?Somewhat Favorable?Neutral?Neutral?Somewhat Unfavorable?Somewhat Unfavorable?Very Unfavorable?Very Unfavorable?

Pepsi One’s Marketing Pepsi One’s Marketing StrategyStrategy

Target Market: Young men.Target Market: Young men.

Product Positioning: Only One has it all.Product Positioning: Only One has it all.

Marketing MixMarketing Mix

Product: Superior sweetener. Product: Superior sweetener.

Avoid word diet.Avoid word diet.

Distribution: Priority versus Diet Pepsi?Distribution: Priority versus Diet Pepsi?

Promotion: $100 million launch.Promotion: $100 million launch.

Trial Repeat PurchaseTrial Repeat Purchase

Price: Similar to other Pepsi products.Price: Similar to other Pepsi products.

IDEO’s New Product IDEO’s New Product DevelopmentDevelopment

Strengths?Strengths?

Weaknesses?Weaknesses?

Overall Evaluation?Overall Evaluation?