New Product Development

New Product Development

Market-Based Management Chapter 5 Market Segmentation, Targeting and Positioning Market segmentation overview Why do we need to segment markets in the first place? Because mkts are seldom homogeneous Thus people have much different

tastes, etc. Criteria for Effective Segmentation Segments must be: Measurable - in terms of purchasing power and size. Reachable - can promote to and serve seg. effectively. Profitable - large enough with sufficient disposable income to be profitable to serve. Match Capabilities - segment must fit with firm caps in process tech., dist., mktg., etc.

3 Segmenting by Characteristics of People: Geographic Segmentation Psychographic Social class, Lifestyle, Personality. Demographic

Age, Sex, Occupation, Education Segmenting Organizational Mkts by Firm Characteristics: Needs & Preferences Segmentation: Usually the best way Benefits sought/problems solved. e.g.

Price, Image, Value Attitudes toward product Perceptions of product/svc. Segmenting by Other Behaviorial Aspects: Product usage Brand loyalty Customer Satisfaction

Needs Based Segmentation: For each segment considered, we develop a profile based on the needs and benefits sought Done by surveys usually But these are not readily

observable in many cases. So we need a way to identify these target consumers. Thus, by linking to demos, we hit can develop a profile of the seg. 9 There Are Two Basic Approaches to Marketing Products

Undifferentiated Differentiated Undifferentiated Marketing Works in Mkts Where Overriding Concern/Need Is Common Among All Consumers. Can Be Efficient One

Product for All Most Marketers Find This Does Not Work Very Well Differentiated Marketing Develop Unique Products for Each Market Segment Position Them to the Customers in That Segment

Develop the Marketing Mix to match the position. Differentiating a Product Offering. Product Features, Performance, Durability, Reliability, Style, Benefits Received Service

Delivery, Installation, Customer Training, Consulting Services, Maintenance and Repair Personnel Competence (Skill/Knowledge), Courteous, Credible, Trustworthy, Reliable ,Consistent, Responsive Image

Product Must Relate to a Strong Image Producing Thing or Idea (Ideas, Symbols, People, Events) Next Step is to Identify Positioning Concepts for Each Target Segment What Is Positioning? Positioning Is the Relationship of Products to Positions in the

Consumers Mind. We Want Our Users/Consumers to Understand What Our Product Is and What It Stands For. Product Ladder Exercise for Colas 15 Criteria for Position Selection Differences Must Be

Important to Buyers Distinctive Superior to Other Products Which Satisfy This Need Communicable Not Easily Copied Affordable Profitable for firm

Other Factors The Product Itself Must Be Right Price must be right. The Image It Coveys Must Fit the Position Media Support Must Carry the Same Message Positioning Approaches

Position Against the competition. Avis "Were Number Two, We Try Harder Use Competition's Features Against Them 7-Up

"the Uncola New, Unoccupied Position Apple Works Better, Hip, Cool Reposition the Competition Advil Repositioning Tylenol 18

Chapter 6 Competitor Analysis and Sources of Advantage 19 Competitive Analysis The search to understand competitors advantages and

disadvantages 20 Five Forces Comparison 21 Sources of Competitive Advantage 22

Cost Advantage Variable and Fixed Costs Scale effects Scope effects Learning effects Strong cost advantage is a barrier to entry

23 Cost and Volume Cost ($) Avg. costs decrease as firm increases volume LRAC A LRAC B LRAC A Firm A moves

from A to A due to learning and reinvestment What should Firm B do? Volume24 Profit Impact of Differentiation (which weve already covered) Advantages. 25

Differentiation Increases avg. costs Also increases profitability due to: Pricing power of meeting customer needs better than competitors. Builds Loyalty barrier to entry

26 Marketing Advantage Mostly about branding: Building associations in the mind of the buyer that are:

Unique Positive Strong Builds barrier to entry. 27 Also important to know customer views of competitors

Brand Mapping 28 Portfolio Analysis Looks at business competitive position and market attractiveness based on share. Looks at multiple SBUs. Helps provide strategic direction for

a firms SBUs. BCG Growth-Share Matrix Cash Cows Dogs High Mkt Growth

Rate Prob. Child Low R&D Stars 10 High 1.0

Low 0.1 Competitive Position (Share Ratio) Expanded Portfolio Analysis GE Market Attractiveness - Bus. Position Mkt Attractiveness: Low High Med. High Business

Position: Ability To Med. Compete Low Evaluating the Ability to Compete Size Growth Share by Seg. Cust. Loyalty Margins

Distribution Tech. Skills Patents Marketing Flexibility Culture Firm Capabilities Market Attractiveness Size

Growth Cust. Sat. Level Competition: How much How intense Price Levels Profitability Technology

Govt Regs. Sensitivity to Economic Trends Strategies for GE Matrix. Invest to Hold Invest to Penetrate Invest to Rebuild Selective Investment Low Investment

Divest. Break Time 6.25 minutes 36

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