Chapter 5,New Product Development, Management, and Strategy,Chapter Outline,Product Strategy in Business MarketingProduct Lines DefinedBusiness New Product DevelopmentOrganization of the New Product EffortProduct Life-Cycle AnalysisDeterminants of the Product MixThe Product AdoptionDiffusion ProcessProduct Portfolio Classification, Analysis, and StrategyProduct Deletion StrategyMarketing of Business ServicesImportant Characteristics of Business ServicesBusiness Service MarketingChallenges and Opportunities,Product Lines Defined,Proprietary or catalog: Standard products offered to many customers and usually inventoried in anticipation of sales orders. For example, the DoAll Company keeps a large inventory of model No. C916A Band Saws to ensure quick delivery to customers. Custom-built: Different variations of accessories and options to complement proprietary or catalog products offered. For example, the DoAll company fills a request from a major company for a custom, made-to-order saw with a larger motor size, larger table size, and automatic indexing. Custom-designed: Products designed for (and usually only for) a particular user. For example, DoAll designed a unique band saw with a custom-fixtured table and remote-control operation for U.S. Army to use to cut up live ammunition. Industrial services: Intangibles, i.e., maintenance, machine repair, consulting. For example, DoAll provides a saw and coolant specialist who makes courtesy inspections at customers plants to assist in using DoAll in product applications.,Custom Product Versus Proprietary Standard Line Manufacturers,Custom: BMW designs a windshield washer fluid container for their new model and sends part prints to a custom plastics component manufacturer. Manufacturer must build production equipment but BMW owns molding dies and rights to product. Supplier sales build relationship, work with customer on design, finalize terms of sale.Standard line: BMW picks a standard wheel bearing for its new model and orders it directly from manufacturer. Manufacturer sells same wheel bearing to others. Supplier sales build relationship, work with customer on application, finalize terms of sale.,Selling Strategy Varies by Type of Relationship,Customer,Customer purchases from many suppliers.,Customer,Customer purchases from bid list of a few suppliers.,Customer,Customer purchases from one supplier for that product category.,S1,Typical Organization Chart Showing Sales Reporting Relationships,President,VP Mfg.,VP Marketing,VP Acct.,Sales Mgr.,Marketing Mgr.,Product Development Mgr.,Customer Service Mgr.,VP Engineering,Does R&D Believe in the Marketing Concept?,It may depend on how long ago researchers graduated from college. Within past five years, some technical schools have begun teaching importance of studying customers needs as a first step in design processfollowing tenets of TQM.Still, most technical departments arent known for their customer orientation.,Product Manager/Marketing Manager Role,Old View: Organize, coordinate, and control.New View: Calculated chaos and controlled disorderCommunicateCommunicateCommunicate: Make things happen.,Questions:What companies purchase products from these producers?What would a Product Manager do to facilitate these transactions and relationships?,New Product Approaches,Technology push: When perceived value of particular technology is great; firm has only a vague notion of possible applications, and usually not much more.Market pull: Primarily the result of marketing research methodologies of interviewing potential users about their needs, then developing solutions to those perceived market needs.,Phases of New Product Development,Idea and concept generationScreening and evaluationBusiness analysisProduct developmentProduct testingProduct commercialization and introduction,Marketing Activities at Each Phase,1.Idea and concept generation: involves the search for product ideas and concepts that meet company objectives2.Screening and evaluation: involves analysis to determine which ideas submitted are pertinent and merit a more detailed study of potential feasibility and market acceptance3.Business analysis: return-on-investment criteria are examined along with competition and the potential for market entry4.Product development: involves taking the product from an idea generated during a brainstorming session to a state of readiness for product and market testing5.Product testing: involves conducting commercial experiments necessary to verify earlier business judgements6.Product commercialization and introduction: includes launching the new product through full-scale production and sales and committing the companys reputation and resources to the products success,Organization of the New Product Effort,Product manager: Individuals responsible for four Ps marketing mix decisions for specific product line as it travels through life cycle; responsibility often extends to new product development.New product committee: Part-time interdisciplinary management group reviews new product proposals; advantages outweigh disadvantages because committee is most common form of organizational structure for managing new products.New product department: Specific department generates and evaluates new product ideas, directs and coordinates development work, and implements field testing and precommercialization of new product; allows for maximum effort in new product development, but at expense of major overhead costs.New product venture team: Task force representing various departments responsible for new product development and implementation; normally dissolved once new product is established in market.,