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8/2/2019 New Product Development and Marketing of Business Services
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New Product Development andMarketing of Business Services
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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) andproduct 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 theircharacteristics and marketing implications?
What are the marketing strategies for business service firms?
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What is a New Product?
A product that is new to the market and to thecompany 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 marketsegment.
Substantial cost reductions without affecting
performance.
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Success Factors of New Products
Product superiority or uniqueness
Market knowledge or marketing effectiveness
Technical and production capabilities
Cross functional team work
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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 productdevelopment ???
High priceshigher than customersexpectations
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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
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New Product Development (NPD)
Process (continued)
Idea Generation: Major sources of new productideas (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
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New Product Development (NPD)
Process (continued)
Idea Screening (questions for which positive answersrequired 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 ofcustomers?
Does it deliver more value to customers than competingproducts?
What is the future growth, market size, competition likely tobe in new product industry?
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New Product Idea Rating Formula
New Product IdeaSignificant Factors
(A)Weightage
(B)Capabilities
(A x B)Rating
1. Company objective &strategies
0.20 0.70 0.14
2. Marketing experienceand effectiveness
0.20 0.50 0.10
3. Production capabilitiesand facilities
0.15 0.40 0.06
4. Research andDevelopment know-how
0.15 0.60 0.09
5. Availability of raw
material and supplies
0.10 0.70 0.07
6. Financial resourcesand profitability.
0.20 0.80 0.16
1.00 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?) ??
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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 orsimulated 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
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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
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NPD Process (conventional development engineeringcycle)
DesignProcess
EngineeringTooling Manufacturing Testing
FinalProduct
The above cycle can be reduced bydoing concurrent engineering.
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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 bythe 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. ??
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Product Development Management
(PDM)
PDM should have:
Ability to create digital products Cross functional collaboration
Managing product information and NPDs
Updating digital data
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Product Lifecycle Management
(PLM)
Change from PDM to PLM has begun
PLM is a software solution aimed atdelivering 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
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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 andgain competitive advantage.
Technological innovations create newproducts and services new to the market.
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HighTech Marketing
High Tech includes telecommunications,computers, software, biotech, consumer electronics.
Major characteristics differentiating high-techmarketing:
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 tounderstand acceptance of new high tech productscalled Modified Technology Adoption Life Cycle
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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?
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High Tech Marketing Strategy
What should be the marketing strategy in view ofTALC 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 marketingcommunication (IMC) strategy
Determine multi-channel distribution strategy ??
Select skimming pricing strategy
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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
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Dimensions Used for Measuring Service Quality
ServiceDimension
Brief Description Examples
Reliability Satisfying a promise Promised deliveryschedule met
TangiblesAppearance ofphysical facilities and
personnel
Responsiveness
Brochures,experienced and
qualified serviceproviders
Trust and confidence
Willingness andability to provideprompt service.
Quick response tocustomers
complaints.
Empathy
Assurance Capable staff.
Treating customersas individuals
Adapting to the needsof individual
customers.
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Marketing of Business Services
Product
Service ClassificationExamples:Three groups:
Pure tangible products
Products combined with services Pure intangible service
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Industrial Product-Service Classification
Pure
tangibleproduct
Materials and components(e.g. Steel, ball bearings)
Personalcomputers
Hotels forconferences
Goodstransportation
Legal
Major product,with minorservice
Equal partsof productand service
Major service,with minorproduct
Pure
intangibleservice
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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
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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 interactionsRequires effective recruitment and training of
service providers
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Unique Characteristics of Services
and Marketing Implications
Variability
Quality of services are highly variabledepending on who provides, when, andwhere they are provided.
Example: Marketing research,
Management education
Standardization of output and uniformity inquality are difficult to achieve. Emphasize quality standards, develop systems to
minimize errors, try to automate
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Unique Characteristics of Services
and Marketing Implications
Perishability
Generally services cannot be massproduced and stored.
Example: Airlines empty seats, unusedwarehouse space
Difficult problems when demand fluctuates
Plan capacity around peak demand
Use pricing, reservation system, and othermethods to achieve closer match betweendemand and capacity
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Unique Characteristics of Services
and Marketing Implications
Non-ownership
Services buyer uses but does not own theservice purchased.
Example: Use of hotel/car rental services
Marketers should communicateadvantages of non-ownership such as: Reduction in labour and overhead
Flexibility
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Marketing in Business Service Firms
Christian Gronroos has argued that servicesmarketing not only requires externalmarketing but
also internaland interactivemarketing: 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 functionalquality.
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Marketing Strategies for Business
Services
Segmenting and targeting
Differentiating the service Developing service package / offer
Pricing
Promotion
Distribution