Todays Session
Product Strategy & New
Product Development
The Funnel
DEFINITION AND MEANING OF A PRODUCT
Definition :
It is a physical thing as well as aComplex set of
economic, technical, legal andpersonal
relationship between a buyer and a seller
Meaning of a Total Product Package : It includes
Basic properties (with fundamental benefits)
Enhanced properties (with tangible benefits), and
Augmented properties (with intangible benefits)
Inacompetitivemarket,
Business marketers must understand target
customers perceptions of atotal product package
and offer thesame better than competitors
CHANGES IN PRODUCT
STRATEGY
Business marketers must understand
that a product strategy is dynamic and
flexible
It changes due to changes in
(i)Customerneeds
(ii)Technology
(iii)GovernmentPolicies/Laws
(iv)ProductLifeCycle
(v) Competition
PRODUCT STRATEGIES FOR
EXISTING PRODUCTS
Business marketers should take the
following steps :
1. Evaluate theperformanceof
existingproducts internal assessment
2. Examine the relative strengths and
weaknesses of the companys productsexternal assessment
3. Decide the product strategies, based
on above analysis
DECIDE PRODUCT
STRATEGIES
(i)Maintain/continuetheproductandits
marketing strategy
(ii) Maintain/continue the product but
change its marketing strategy
(iii)Modifythe product &changemarketing
strategy
(iv)Drop/eliminatetheproduct
(v)Addnewproduct
IMPACT OF TECHNOLOGY
Technological innovations create new products/ services that
are new tothe world. Examples of these innovations, called
breakthrough technology are :
(i)Technologicalinventionsof1940s
amplifiercircuit and vacuum tube
creatednewproducts/serviceslike radio, wireless telegraphy,
and telephoneservice.
(ii)Technological inventions of1950s & 70s
oftransistor,integratedcircuit(IC),microprocessorshave
applicationsinnewproductslikeTVsets,movieCameras,
Computers,Calculators,Mobilephones,Printersetc.,
(iii)Digitalrevolution
of information technology and the
internethaveimprovedcompanyandconsumercapabilities
Causes of New Product Failures
Overestimation of Market Size
Product Design Problems
Product Incorrectly Positioned, Priced or
Advertised
Costs of Product Development
Competitive Actions
Inadequate resources
To create successful new products, the company
must:
know its strengths and weaknesses
understand its customers, markets and competitors
develop products that deliver superior value to
customers
New Product Development
Process
Idea Generation and Screening
Concept Development and Testing
Marketing Strategy
Business Analysis
Product Development
Test Marketing
Commercialization
Open Innovation
Idea Generation
Selection
Execution
Commercialization
Open Innovation
ganisation
Idea Generation
Selection
Execution
Commercialization
Current
Market
Open Innovation
Idea Generation
Selection
Execution
Commercialization
Open Innovation
Idea Generation
Develop
New ideas
Selection
Execution
Commercialization
Open Innovation
Idea Generation
Ideas and
innovations
from inside the
organisation
Develop
New ideas
patents and
innovations
from outside the
organisation
Selection
Execution
Commercialization
Open Innovation
Idea Generation
Ideas and
innovations
from inside the
organisation
Develop
New ideas
patents and
innovations
from outside the
organisation
Selection
Execution
Commercialization
Open Innovation
Idea Generation
Selection
Ideas and
innovations
from inside the
organisation
Develop
New ideas
patents and
innovations
from outside the
organisation
Select
Successful
Ideas
Execution
Commercialization
Open Innovation
Idea Generation
Selection
Develop
New ideas
Select
Successful
Ideas
patents and
innovations
from outside the
organisation
Technology
Licensing
IN
Ideas and
innovations
from inside the
organisation
Execution
Commercialization
Open Innovation
Idea Generation
Selection
Ideas and
innovations
from inside the
organisation
patents and
innovations
from outside the
organisation
Select
Successful
Ideas
Technology
Licensing
IN
Develop
New ideas
Execution
Commercialization
Open Innovation
Idea Generation
Selection
Execution
Develop
New ideas
Select
Successful
Ideas
Prototypes
and
Production
patents and
innovations
from outside the
organisation
Technology
Licensing
IN
Ideas and
innovations
from inside the
organisation
Commercialization
Idea Generation
Selection
Execution
Develop
New ideas
Select
Successful
Ideas
Prototypes
and
Production
Technology
Licensing
IN
IP
Licensing
IN
Open Innovation
patents and
innovations
from outside the
organisation
IP
Licensing
OUT
Ideas and
innovations
from inside the
organisation
Commercialization
Idea Generation
Selection
Execution
Commercialization
Develop
New ideas
Select
Successful
Ideas
Prototypes
and
Production
Product
brought
to market
Technology
Licensing
IN
IP
Licensing
IN
Open Innovation
patents and
innovations
from outside the
organisation
IP
Licensing
OUT
Ideas and
innovations
from inside the
organisation
Current
Market
Idea Generation
Selection
Execution
Commercialization
Develop
New ideas
Select
Successful
Ideas
Prototypes
and
Production
Product
brought
to market
Technology
Licensing
IN
IP
Licensing
IN
Open Innovation
Technology
Spin-ofs
patents and
innovations
from outside the
organisation
IP
Licensing
OUT
Ideas and
innovations
from inside the
organisation
Current
Market
New
Markets
Step 1: Idea Generation
Systematic Search for New Product
Ideas
Internal sources
Customers
Competitors
Distributors
Suppliers
Step 2- Idea Screening
Process to spot good ideas and drop
poor ones
Criteria
Market Size
Product Price
Development Time & Costs
Manufacturing Costs
Rate of Return
3.
3. Choose
Choosethe
theBest
BestOne
One
2.
2. Concept
ConceptTesting
Testing--Test
Testthe
the
Product
ProductConcepts
Conceptswith
withGroups
Groups
of
ofTarget
TargetCustomers
Customers
1.
1. Develop
DevelopProduct
ProductIdeas
Ideasinto
into
Alternative
Alternative
Product
ProductConcepts
Concepts
Step 3. Concept Development & Testing
Step 4- Marketing Strategy
Development
Part
Part One
One -- Overall:
Overall:
Target
Target Market
Market
Planned
Planned Product
Product Positioning
Positioning
Sales
Sales &
& Profit
Profit Goals
Goals
Market
Market Share
Share
Part
Part Two
Two -- Short-Term:
Short-Term:
Products
Products Planned
Planned Price
Price
Distribution
Distribution
Marketing
Marketing Budget
Budget
Part
Part Three
Three -- Long-Term:
Long-Term:
Sales
Sales &
& Profit
Profit Goals
Goals
Marketing
Marketing Mix
Mix Strategy
Strategy
IfIfYes,
Yes,Move
Moveto
to
Product
ProductDevelopment
Development
IfIfNo,
No,Eliminate
Eliminate
Product
ProductConcept
Concept
Business
BusinessAnalysis
Analysis
Review
Reviewof
ofProduct
ProductSales,
Sales,Costs,
Costs,
and
andProfits
ProfitsProjections
Projectionsto
toSee
Seeifif
They
TheyMeet
MeetCompany
CompanyObjectives
Objectives
Step 5. Business Analysis
Step 6. Product Development
Step 7- Test Marketing
Standard
Standard
Test
Test Market
Market
Full
Fullmarketing
marketingcampaign
campaign
in
inaasmall
smallnumber
numberof
of
representative
cities.
representative cities.
Controlled
Controlled
Test
Test Market
Market
AAfew
fewstores
storesthat
thathave
have
agreed
to
carry
new
agreed to carry new
products
productsfor
foraafee.
fee.
Simulated
Simulated
Test
Test Market
Market
Test
Testin
inaasimulated
simulated
shopping
environment
shopping environment
to
toaasample
sampleof
of
consumers.
consumers.
Product Life Cycle
Sales and
Profits (Rs)
Sales
Profits
Time
Product
Development
Losses/
Investments (Rs)
Introduction
Growth
Maturity
Decline
Introduction Stage of the PLC
Sales
Sales
Low
Low sales
sales
Costs
Costs
High
High cost
cost per
per customer
customer
Profits
Profits
Negative
Negative
Marketing
Marketing Objectives
Objectives
Create
Create product
product awareness
awareness
and
and trial
trial
Product
Product
Offer
Offer aa basic
basic product
product
Price
Price
Use
Use cost-plus
cost-plus
Distribution
Distribution
Advertising
Advertising
Build
Build selective
selective distribution
distribution
Build
Build product
product awareness
awareness among
among early
early
adopters
and
dealers
adopters and dealers
Growth
Growth Stage
Stage of
of the
the PLC
PLC
Sales
Sales
Rapidly
Rapidly rising
rising sales
sales
Costs
Costs
Average
Average cost
cost per
per customer
customer
Profits
Profits
Rising
Rising profits
profits
Marketing
Marketing Objectives
Objectives
Maximize
Maximize market
market share
share
Product
Product
Offer
Offer product
product extensions,
extensions, service,
service,
warranty
warranty
Price
Price to
to penetrate
penetrate market
market
Price
Price
Distribution
Distribution
Advertising
Advertising
Build
Build intensive
intensive distribution
distribution
Build
Build awareness
awareness and
and interest
interest in
in the
the
mass
mass market
market
Maturity
Maturity Stage
Stage of
of the
the PLC
PLC
Sales
Sales
Peak
Peak sales
sales
Costs
Costs
Low
Low cost
cost per
per customer
customer
Profits
Profits
High
High profits
profits
Marketing
Marketing Objectives
Objectives
Maximize
Maximize profit
profit while
while defending
defending
market
market share
share
Product
Product
Diversify
Diversify brand
brand and
and models
models
Price
Price
Price
Price to
to match
match or
or best
best competitors
competitors
Distribution
Distribution
Advertising
Advertising
Build
Build more
more intensive
intensive distribution
distribution
Stress
Stress brand
brand differences
differences and
and benefits
benefits
Decline
Decline Stage
Stage of
of the
the PLC
PLC
Sales
Sales
Declining
Declining sales
sales
Costs
Costs
Low
Low cost
cost per
per customer
customer
Profits
Profits
Declining
Declining profits
profits
Marketing
Marketing Objectives
Objectives
Reduce
Reduce expenditure
expenditure and
and milk
milk the
the brand
brand
Product
Product
Phase
Phase out
out weak
weak items
items
Price
Price
Cut
Cut price
price
Distribution
Distribution
Advertising
Advertising
Go
Go selective:
selective: phase
phase out
out unprofitable
unprofitable
outlets
outlets
Reduce
Reduce to
to level
level needed
needed to
to retain
retain
hard-core
hard-core loyal
loyal customers
customers
3M
Formerly known as the Minnesota
Mining and Manufacturing Company
Founded on the North Shore of Lake
Superior at Two Harbors, Minnesota in
1902
With over 76,000 employees they
produce over 55,000 products,
including: adhesives, abrasives,
laminates, passive fire protection, dental
products, electrical materials, electronic
circuits and optical films
Masking Tape
In 1923 3M employee
Richard Drew visited
an auto-repair shop in
St. Paul, Minnesota.
3M produced and sold
sandpaper and Drew
was in the shop to
test out a new batch.
Masking Tape
When he entered
the shop employees
were expressing
disappointment at a
failed attempt to
paint a car in the
two-tone style that
was becoming
popular at the time.
Masking Tape
Typically how the effect was achieved
was by painting part of the car in one
colour while covering the other parts
with butcher paper
The butcher paper was usually held in
place with a heavy adhesive tape.
Unfortunately, removing the adhesive
tape peeled away part of the paint
job.
THE IMPORTANT BIT:
Rather than just
sympathise with his
customers and move on,
Drew decided to do
something about it.
Masking Tape
His company 3M had a lot of knowhow in creating adhesives from
making sand paper, so Drew figured
he would try to make a paper tape to
help solve his customers problems.
Drew began experimenting with a
range of materials and manufacturing
processes to solve this problem.
William McKnight
11 November 1887
4 March 1978
Businessman who
served his entire
career in the 3M
corporation.
McKnight encouraged
3M management to
delegate
responsibility
Masking Tape
Eventually the then-president of 3M,
William McKnight, noticed that Drew was
spending time on money on this unofficial
project.
McKnight asked Drew to return to his actual
job, improving sandpaper
But Drew persisted, diverting funds and
time to work on abrasives
McKnight eventually realised this, but did
nothing
Masking Tape
In 1925 Drew managed to create
Masking Tape.
This product has sold in the millions
for 3M since then
And this was just the start of
creating an innovation culture in 3M
William McKnight learned his lesson
from Richard Drew
Spenser Silver
Born 1941
co-creator of the Post-it note
In 1966, earned a doctorate in
organic chemistry from the
University of Colorado in 1966,
before taking a position as a
Senior Chemist in 3M's Central
Research Labs.
Arthur Fry
Born 1931
co-creator of the Post-it note
In 1953, while still enrolled in
undergraduate school, Fry took a job at 3M
(then it was still called Minnesota Mining
and Manufacturing Company) as a new
product development researcher. He
worked in new product development
throughout his career at 3M until his
retirement in the early 1990s.
Post-It Note
In 1968, Spencer Silver (with the help of
Jesse Kops) accidentally developed a "lowtack", reusable pressure sensitive
adhesive.
For five years, Silver promoted his
invention within 3M, both informally and
through seminars, but without much
success.
He was unable to find a marketable use
for his invention.
Post-It Note
In 1974, Arthur Fry attended a seminar given
by Silver asking for ideas for his adhesive.
Fry sang in his church choir on weekends, and
he used slips of paper to mark the pages of
his hymnal. When the book was opened,
however, the makeshift bookmarks often
moved around or fell out altogether.
It occurred to him that Silver's adhesive could
be put to use to create a better bookmark. If it
could be coated on paper, Silver's adhesive
would hold a bookmark in place without
damaging the page on which it was placed.
Post-It Note
Until the 1990s, when the patent
expired, Post-it Brand notes were
exclusively produced by 3M.
Now other companies produce sticky or
repositionable notes, but the term
"Post-it" and the canary yellow color are
trademarks of 3M.
Accepted generic terms for competitors
include "sticky notes" or "repositionable
notes" or "repositional notes.
The Philosophy
15% of all employees time is allowed to
be on their pet projects (the 3M Way).
The work of outstanding technical
employees is recognised by the 3M Carlton
Society, this is voted on by peers.
Employees that create products which sell
$4 million or more are awarded the
prestigious Golden Step Award
Employees have a choice to work on a
management or laboratory career ladder,
no employee is forced to take a
management role if the dont wish it.