1. Managing The Marketing Mix
Lecture 2:
Product and New Product Development
Dr. Martin J. Liu
Lecturer in Marketing

2. Review
Introduction Marketing Mix:
The set of controllable tactical marketing tools: product, price,
What is a product? place and promotion that the firm blends to produce the
response it wants in the target market.
New Product
Development Marketing mix is a basic tool to identify Product positioning
and Segmenting the Market.
Product Life Cycle
(PLC) Product Positioning:
The way that product is defined by consumers on important
Diffusion of
Innovation Cycle attributes - the place the product occupies in consumer’s minds
relative to competing products. i.e. Symbolic, Functional and
Summary Experiential.
Market Segmentation:
The process of evaluating each market segment’s
attractiveness and selecting one or more segments to enter.

3. What is A Product?
Introduction
What is a
Bundle of physical, service, and symbolic
product? attributes designed to enhance buyers’ want
satisfaction.
New Product
Development
Product Life Cycle
(PLC)
Diffusion of
Innovation Cycle
Summary

4. Types of Products
Introduction
• Actual product • Consumer Products
What is a – Quality level – Convenience products
product?
– Features – Shopping products
New Product – Design – Specialty
Development – Package – unsought
– Brand name
Product Life Cycle
(PLC) • Industrial Products
• Augmented product – Material and parts
Diffusion of – Installation – Capital items
Innovation Cycle
– After-sale service – Supplies and services
Summary – Warranty
– Delivery and credit
– Attached benefit

5. New Products Commonly
Accepted Categories
Introduction
What is a New Category Addition to
product? Entries Existing Lines
New Product
Development
Product Life Cycle New Products
(PLC)
Diffusion of
Innovation Cycle
Summary
Repositioning
New-to-the-
world Products New Product Lines

6. Factors Influencing New Product
Development Success
Introduction
What is a product? Technological factors
New Product
Development
Product Life Cycle
(PLC)
Diffusion of
Innovation Cycle
Summary

7. Risk in New Product Development
Introduction
• NPD is a high risk activity
What is a product? – Aprox. 90% of new products fail
– Only aprox. 40% of new consumer products that are brought to
New Product
market will be around 5 years later
Development
– Industrial markets 35-65% failure rate
Product Life Cycle – Pharmaceutical firms spend on average E400m per drug
(PLC)
Diffusion of • Innovation takes time
Innovation Cycle – Biotechnology average 10 years of development
Summary
• Why do new products fail?
– Failure to understand consumer needs
– Undefined market
– Undifferentiated products

8. The Eight Stags of New Products
Development Process
Introduction
What is a product?
New Product
Development
Product Life Cycle
(PLC)
Diffusion of
Innovation Cycle
Summary

9. The Eight Stags of New Products
Development Process
Introduction • (1) New Product Strategy
What is a product? – Guideline for resource allocation
– Sets up key criteria against which projects can be managed
New Product • (2) Idea Generation
Development – The search for innovative ideas and a process for the
management of ideas
Product Life Cycle
(PLC) • (3) Screening
– Initial assessment of demand for the ideas generated
Diffusion of
– Ideas acceptable for further development
Innovation Cycle
• (4) Concept Development and Testing
Summary – Content & form of idea
– Development of a variety of concepts
– Tested for compatibility with production plant
– Tested for compatibility with customer needs/tastes

10. The Eight Stags of New Products
Development Process
Introduction
• (5) Business Analysis
What is a product? – Market analysis, break even volume, technical costs,
production implications. Fit with corporate objectives
New Product
• (6) Product Development & Testing
Development
– Determine the validity of the theoretical product, e.g.,
Product Life Cycle Innocent Smoothies made & tested fresh fruit smoothies at a
(PLC) music festival.
– Prototypes-alterations to specifications.
Diffusion of
Innovation Cycle • (7) Test Marketing
– Small scale tests with customers.
Summary – N.B. test marketing is not always feasible or desirable.

11. The Stage and Gate Model (Cooper 1993)
Introduction
What is a product?
New Product
Manage risk by screening at review points.
Development
Product Life Cycle
(PLC)
Diffusion of
Innovation Cycle
Summary

12. Commercialization
Introduction
• Product launch considerations and strategies:
What is a product?
–Degree of novelty of product/service
New Product –Familiarity/ position in intended market
Development –Competition; status/ anticipated reaction
Product Life Cycle
(PLC) • Timing
–Diffusion theory and new product acceptance.
Diffusion of
Innovation Cycle –Identify the early adopters
Summary
• Communications
–Internal and external
• Monitoring the launch

13. Product Life Cycle (PLC)
Introduction
• A way to trace the stages of a product's acceptance from its
What is a product? introduction to its demise.
New Product • One of the most familiar concepts in marketing
Development • A prevalent marketing management tool
• Refers to the life of the product category.
Product Life
Cycle (PLC) • The time a product category spends in a stage of the product
life cycle may vary from a few weeks to decades.
Diffusion of • Does not predict how long a product category will remain in
Innovation Cycle any one stage
Summary • A tool to help marketers understand:
– where their product is now
– what may happen
– which strategies are normally appropriate.

14. Product Life Cycle (PLC)
Sales/Profits
Development Introduction Growth Maturity Decline
Rejuvenation
Limited Life Cycle
Product Life Cycle
Profits
Losses Time
Break Even

15. Examples of PLC: High Learning Product
Introduction
• Significant education of the
What is a product? customer is required;
New Product • Extended introductory
Development period.
Product Life
Cycle (PLC)
Diffusion of
Innovation Cycle
Summary

16. Examples of PLC: Low Learning Product
Introduction
• Sales begin immediately;
What is a product?
• Little learning is required
New Product by the consumer;
Development • Benefits of purchase are
readily understood .
Product Life
Cycle (PLC)
Diffusion of
Innovation Cycle
Summary

17. Examples of PLC: Fashion Product
Introduction
• Most often appear in
What is a product? women’s and men’s
New Product
clothing styles;
Development • Length of the cycles may
be years or decades.
Product Life
Cycle (PLC)
Diffusion of
Innovation Cycle
Summary

18. Examples of PLC: Fad Product
Introduction
• Rapid sales on introduction
What is a product?
• Equally rapid decline;
New Product • Often novelties and have a
Development short life cycle.
Product Life
Cycle (PLC)
Diffusion of
Innovation Cycle
Summary

19. Diffusion of An Innovation
Introduction
What is a product?
New Product
Development
Product Life Cycle
(PLC)
Diffusion of
Innovation
Cycle
Summary

20. Crossing the Chasm
Introduction
What is a product?
New Product
Development
Product Life Cycle
(PLC)
Diffusion of
Innovation
Cycle
Summary

21. Innovating for Mature Markets
Process Integration Business Model
Innovation Innovation Innovation
Line Extension Marketing Experiential
Innovation Innovation Innovation

22. Introduction
What is a product?
New Product
Development
Product Life Cycle
(PLC)
Diffusion of
Innovation
Cycle
Summary

23. Summary
Introduction
• There are four main types of new products that can be
What is a product? launched
New Product • NPD is a high risk/ high reward activity
Development • A formal review process with review points and a clear new
product strategy underlying the process leads to greater
Product Life Cycle
success
(PLC)
• Product life cycle (PLC) and diffusion of innovation.
Diffusion of • A strong market orientation and understanding of
Innovation Cycle
technological opportunities is key.
Summary