Building customer value

COURSE #8

Daniela Ionita,
Lecturer - Marketing Department
Objectives

1. Define the steps in new

product development
process.
2. Describe the stages of the
product life cycle and how
marketing strategies change.
3. Discuss the decisions
companies make in building
 Managing new product-
development
New product-development
(NPD) - development of CUSTOMER
SYSTEMATIC
CENTERED
original products, product creates
TEAM BASED
focuses
an innovation
on finding new
oriented
waysculture
to solve
and
customer
yields
improvements, modifications various
problemsdepartments
a large
andnumber work
create of
more closely
product together,
customer-satisfying
ideas
and new brands through the overlapping the steps in the process to save time
experiences
and increase effectiveness
firms own product
development effort.

Important!
Customers ->new solutions
and variety
Companies -> key source
of growth

Yet innovation can be very

risky (67% fail) and very
expensive.

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New product-development (NPD)
process - overview

Building Customer Value: Products

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 (1) Idea
generation

Systematic search for new

product ideas
Internal idea sources
through formal R&D
External idea sources
distributors, suppliers,
competitors and customers
Crowdsourcing - inviting
broad communities of
people into the innovation (e.g Procter&Gamble developed
process its Connect+Develop innovation
platform)
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 (2) Idea screening
Screening new product ideas to
spot good ideas and drop poor
ones as soon as possible

Real (Is there a real need/desire

for the product?)
Win (Does it offer a reliable
competitive advantage?)
Worth doing (Does it offer
sufficient profit potential?)

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 (3) Concept
development and
testing

Product concept a detailed

version of the new product idea stated in a
meaningful consumer terms

Concept testing testing with groups of

target consumers (symbolically or physically).

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(4) Marketing strategy
development
Designing an initial
marketing strategy
statement for a new
product based on the
product concept
1) Target market, planned
value proposition
2) Products planned price,
distribution and
promotion for the 1 st
year
3) Planned long-run salesBuilding Customer
and profit goals
(1)The target market is younger,
well-educated, moderate to high
income individuals, couples and
small families seeking practical,
environmentally responsible
transportation. The car will be
positioned as more fun to drive
and less poluting than todays
engine or hybrid cars
(2)The battery-powered all-electric
car will be offered in 3 colors and
will have a full set of accessories
as standard features. It will sell
at a retail price of $25,000 with
15% off the list price to dealers.
A marketing budget of $50
million will be split 50-50
between a national media
campaign and local event
marketing.
(3) we intend
Value: to capture a 3%long-
Products
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run share of the total market and
(5) Business analysis (6) Product development

Developing the product

A review of the sales,
costs and profit
projections for a new
product to find out
whether these factors
satisfy the companys
objectives
Financial attractiveness
concept into a physical
product to ensure that the
product idea can be turned
into a workable market
offering (huge investments)
Test it to see if it performs
safely, effectively and
consumers find value in it.

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 (7) Market testing (8) Commercialization

The stage at which the product

and its proposed marketing
program (targeting,
positioning, advertising,
distribution, pricing, branding,
packaging, budget levels) are
tested in realistic market
settings
An alternative to standard
market test controlled market
test (controlled panels of
shoppers/stores) and simulated
market test (simulated online
shopping environments).
Introducing a new product into
the market
Build/rent a manufacturing
facility
High budget on marketing effort
(McDonalds spent $100 million
to introduce McCafe coffee in
USA)
Timing, where to launch

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Product
life cycle
(PLC)

The course of a
products sales and
profits over its
lifetime

Sales and profits over the products

life from inception to decline.

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 PLC strategies

Introducti Growth Maturity Decline

on
SALES Low Rapidly rising Peak Declining

COST/CUSTOM High cost Average Low Low

ER
PROFITS Negative Rising High Declining
CUSTOMERS Innovators Early adopters Middle majority Laggards
COMPETITORS Few Growing no Stable no Declining no
MKT Awareness, Maximize Maximize profit , Reduce costs,
OBJECTIVES trial market share defending market milk the
share brand
PRODUCT Basic Extensions, Diversify models Phase out
service weak items
PRICE Cost plus Penetration Match/beat Cut price
competitors
DISTRIBUTION Selective Intensive More intensive Selective
PROMOTION Advertising Advertising Sales promo -
sales promo
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What is a brand?
If every asset we own, every
building, and every piece of
equipment were destroyed in a
terrible natural disaster, we would
be able to borrow all the money to
replace it very quickly because of
the value of our brand The brand
is more valuable than the totality of
all these assets. (McDonalds
CEO).

Brands are more than just names and

symbols -> it represents what the products
means to consumers.
Brand
equity
Powerful brands high brand equity (+/-) the
differential effect that knowing the brand name has
on customer response to the product.
Differentiation
(what makes the brand stand
out)
Relevance
(how consumers feel it meets
their needs)
Knowledge
(how much consumers know
about the brand)
Esteem
(how highly consumers regard
and respect the brand) 14
Building strong brands (1/4)
Brand
positioning Brand positioning can be realized
at any of three levels:

Brand 1. Product attributes

name (Pampers -> fluid absorption,
selection fit, disposability).

2. Benefits
Brand (Pampers -> cleanliness,
sponsorshi dryness)
p
3. Beliefs and values
Brand (Pampers -> helping mom
developme with her babys
nt development).

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Building strong brands (2/4)
Brand Desirable qualities for a brand name
positioning include the following:

It should suggest something about

Brand the products benefits and qualities
name (Wash&Go, Dove)
selection
It should be easy to pronounce,
recognize and remember (iPad, Tide)
Brand
sponsorshi It should be distinctive (Yahoo!,
p Google)

Brand It should be extendable (Amazon vs

developme Swatch)
nt
It should translate easily into foreign
languages
Building (Exxon
Customer Value: vs.
Products Whirlpool) 17
and Brands
Building strong brands (3/4)
Brand Sponsorship options:
positioning
1.National brand (manufacturers
brand) Samsung Galaxy
Brand
name
selection
2.Private brand (store brand,
distributor brand) Lidl Pilos
(Napolact)
Brand
sponsorshi
p
3.Licensing (Hello Kitty)
4.Co-branding - two established
Brand brand names of different
developme companies are used on the same
nt
product (Nike+iPod Sport Kit)
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Building strong brands (4/4)
Ariel Regular
Ariel Color
Brand Ariel Mountain
positioning Spring

PRODUCT
Brand CATEGORY
Existing
name New
selection Existi Line Brand
ng extension extension
BRAND
Brand NAME
sponsorshi Multibrand New
p New s brands

Brand
Heineken
developme Romania
nt

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and Brands
 Lavazza
-Making the
everyday
extraordinaril
y Italian
For four generations, Lavazza has been creating authentic Italian coffee, a
symbol of conviviality, quality, and the Italian way of life. But there was
an opportunity for Lavazza to be known for more than just great coffee
there was the chance to become a truly iconic globalbrand.
We rose to the challenge, defining a new brand proposition that embodies
the heritage and vision of the Lavazza brand: Celebrating the Italian
way of life with every cup of coffee. This proposition was translated
into a clear visual and verbal brand expression, delivered consistently
across every touchpoint.
The hero product that launched the new identity was Lavazzas A Modo Mio
capsule coffee system, which was given a fresh, contemporary look,
with a clear typographic system and imagery that would evoke the taste
and aroma of an Italian coffee shop at home.
We developed a new brand proposition and identity system worthy of an
iconic global brand. Tapping into its heritage and passion for detail, we
dialed up Lavazzas authentic Italianness and spirit of inventiveness to
express the brand more clearly and help shift customer perceptions of