new product development and marketing of business services

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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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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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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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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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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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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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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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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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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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

new product development and marketing of business services

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