Obchodná fakulta Ekonomickej Univerzity v Bratislave
Marketing campaign for a new product
(Anglický jazyk)
Juraj Kučera
2.ročník, Pocr_5
16.10.2012
Marketing campaign for a new product
What does “product” mean?
A product is anything that can be offered to a market that might satisfy a want or need. This
means that services, leisure activity, people (politicians, athletes, actors) places (holiday
resort) and organizations can also be considered as products.
Consumers still need new products, so creating and developing new products is inevitable.
As a new product can be considered
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A product that opens up an entirely new market
A product that adapts or replace an existing product
A product that significantly broadens the market for an existing product
An old product introduced in a new market
An old product packaged in a different way
An old product marketed in a different way
Categories of new product
1. New to the world products – innovative products (iPod)
2. New product lines – to allow the firm to enter an existing market (magnum Ice
cream)
3. Additions to product line – to supplement the firm’s existing product line
4. Improvements and revisions of existing products (new car model)
5. Repositioned products – existing products targeted at new markets
6. Cost reductions – new product that provide similar performance at lower cost
Strategy of New product development
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Company can buy another smaller company and take products.
Company can buy some attractive patents
Company can buy a licence
Developing new product
Investing in their development is crucial to business growth and profitability.
Process of new product development
New product development is a process which is designed to develop, test and considered
the variability of products which are new to the market in order to ensure the growth or
survival of the organization.
Why develop new products?
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To add the product portfolio
To replace declining products
To fill a gap in the market
To keep up with competitors
Make a profit
To maintain competitive advantage
Steps of NPD
1. Idea Generation
The new-product development process starts with the search for ideas. Top managers
should define the product and market scope and the new product’s objectives. They should
state how much effort should be devoted to developing breakthrough products, modifying
existing products, and copying competitors’ products. New-product ideas can come from
many sources: customers, scientists, competitors, employees, channel members, and top
management. The highest percentages of ideas for new industrial products originate with
customers. Companies can learn a great deal by studying their “lead users” - those
customers who make the most advanced use of the company’s products. Many of the best
ideas come from asking customers to describe their problems with current products.
Successful companies have established a company culture that encourages every employee
to seek new ways of improving production, products, and services.
Examples:
Toyota claims its employees submit 2 million ideas annually (about 35 suggestions per
employee), over 85 percent of which are implemented. Kodak and other firms give
monetary, holiday, or recognition awards to employees who submit the best ideas.
Companies can also find good ideas by researching their competitors’ products and services.
They can learn from distributors, suppliers, and sales representatives. They can find out
what customers like and dislike in their competitors’ products. They can buy their
competitors’ products, take them apart, and build better ones. An increasing number of
companies train and reward sales representatives, distributors, and dealers for finding new
ideas. New-product ideas can come from other sources as well, including inventors, patent
attorneys, university and commercial laboratories, industrial consultants, advertising
agencies, marketing research firms, and industrial publications. But although ideas can flow
from many sources, their chances of receiving serious attention often depend on someone in
the organization taking the role of product champion.
2. Idea Screening
In screening ideas, the company must avoid two types of errors. A DROP-error occurs when
the company dismisses an otherwise good idea. A GO-error occurs when the company
permits a poor idea to move into development and commercialization. An absolute product
failure loses money; its sales do not cover variable costs. A partial product failure loses
money, but its sales cover all its variable costs and some of its fixed costs. A relative product
failure yields a profit that is less than the company’s target rate of return. The purpose of
screening is to drop poor ideas as early as possible.
3. Concept development and testing
- Concept development:
We shall illustrate concept development with the following situation: A large food
processing company gets the idea of producing a powder to add to milk to increase its
nutritional value and taste.
Attractive ideas must be refined into testable product concepts. A product idea is a possible
product the company might offer to the market. A product concept is an elaborated version
of the idea expressed in meaningful consumer terms. A product idea can be turned into
several concepts. The first question is: Who will use this product? The powder can be aimed
at infants, children, teenagers, young or middle-aged adults, or older adults. Second, what
primary benefit should this product provide? Taste, nutrition, refreshment, energy? Third,
when will people consume this drink? Breakfast, midmorning, lunch, midafternoon, dinner,
late evening?
- Testing:
Concept testing involves presenting the product concept to appropriate target consumers
and getting their reactions. The concepts can be presented symbolically or physically. In the
past, creating physical prototypes was costly and time-consuming, but computer-aided
design and manufacturing programs have changed that. Today firms can design alternative
physical products (for example, small appliances or toys) on a computer, and then produce
plastic models of each. Potential consumers can view the plastic models and give their
reactions. Companies are also using virtual reality to test product concepts. 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.
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 formed by
combining varying levels of the attributes, then asked to rank the various offers.
Management can identify the most appealing offer and the estimated market share and
profit the company might realize. Conjoint analysis has become one of the most popular
concept development and testing tools
4. Marketing Strategy
After testing, the new-product manager must develop a preliminary marketing-strategy plan
for introducing the new product into the market. The plan consists of three parts.
The first part describes the target market’s size, structure, and behaviour; 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.
5. Business Analysis
After management develops the product concept and marketing strategy, it can 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 product
concept can move to the product-development stage. Management needs to estimate
whether sales will be high enough to yield a satisfactory profit.
After preparing the sales forecast, management should estimate expected costs and profits.
6. Product development
Up to now it has existed only as a word description, a drawing, or a prototype. This step
involves a large jump in investment that dwarfs the costs incurred in the earlier stages. At
this stage the company will determine whether the product idea can be translated into a
technically and commercially feasible product. The R&D department will develop one or
more physical versions of the product concept. Its goal is to find a prototype that consumers
see as embodying the key attributes described in the product-concept statement, that
performs safely under normal use and conditions, and that can be produced within the
budgeted manufacturing costs.
Developing and manufacturing a successful prototype can take days, weeks, months, or even
years.
7. Test marketing
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 to a market test. Most
companies know that market testing can yield valuable information about buyers, dealers,
marketing program effectiveness, and market potential. Not all companies undertake
market testing but high investment–high risk products, where the chance of failure is high,
must be market tested.
Companies use consumer-goods market testing and business-goods testing.
Many companies today are skipping test marketing and relying on faster and more
economical market-testing methods. Managers review retail scanner data, which tell them
within days how the product is doing and what corrective fine-tuning to do.
8. Commercialization
If the company goes ahead with commercialization, it will face its largest costs to date. To
introduce a major new consumer packaged goods into the national market, the company
may have to spend between $20 million and $80 million in advertising and promotion in the
first year. In commercialization are important these statements:
- WHEN (Timing)
In commercializing a new product, market-entry timing is critical. The company faces three
choices:
a) The First Entry -The first firm entering a market usually enjoys the “first mover
advantages” of locking up key distributors and customers and gaining reputational
leadership.
b) Parallel Entry-The firm might time its entry to coincide with the competitor’s entry.
The market may pay more attention when two companies are advertising the new
product.
c) Late Entry -The competitor will have borne the cost of educating the market. The
competitor’s product may reveal faults the late entrant can avoid. The company can
also learn the size of the market.
- WHERE (geographic strategy)
The company must decide whether to launch the new product in a single locality, aregion,
several regions, the national market, or the international market. Company size is an
important factor here. Small companies will select an attractive city and put on a blitz
campaign. They will enter other cities one at a time. Large companies will introduce their
product into a whole region and then move to the next region. 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. With the World Wide
Web connecting far-flung parts of the globe, competition is more likely to cross national
borders. Companies are increasingly rolling out new products simultaneously across the
globe, rather than nationally or even regionally.
- TO WHOM (Traget-market prospects)
the company must target its initial distribution and promotion to the best prospect groups.
They would be early adopters, heavy users, and opinion leaders, and they could be reached
at a low cost.
The aim is to generate strong sales as soon as possible to motivate the sales force and
attract further prospects.
- HOW (Introductory market strategy)
The company must develop an action plan for introducing the new product into the rollout
markets.
When marketing the launch of a new product, you need to do more than just publicize
information. Ideally, you would have a well-defined target audience for the new product,
and a coordinated campaign to appeal to that target.
SOURCES
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Marketing management, Philip Kotler, 2002
Marketing, Jaroslav Kita a kol., 2010
English for Business Studies, Ian MacKenzie, 2010
Strategický marketing, D. Lesakova, 2011
Internet, Wikipedia