B2B Marketing Lecture Eight: B2B – New Product Development
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B2B Marketing
Lecture Eight: B2B – New Product
Development
Lecture Objectives:
At the end of the session, students are
expected to: Define value proposition and discussion on the
types of value proposition.
Explain the layers of a product.
Discuss the importance and types of product innovations.
Demonstrate how firms develop new products.
Explain the process of product adoption and the diffusion of innovations.
Building a Better Value Proposition Value proposition – is defined as the benefits the
consumer will receive when buying the product. (Kotler, 2006)
Example: Dell: Dell’s value proposition is
simple. Dell will deliver a low-cost,
customized computer direct to your door.
Dell can keep its prices down because of it’s
just-in-time ordering system which minimizes
stock and the need to calculate demand in
advance.
Four (4) Types of Value Proposition
1. Our product is unique
2. We have the lowest prices
3. We make things easier for you
4. We take ownership of a problem
Our product is unique
Coca-cola: Coca-cola, produced by Coca-cola
Enterprises is a unique product with it’s formula
famously being a closely guarded secret. This secret
formula combined with exclusive use of the coca-
cola brand name means that nobody else can ever
produce a coca-cola product, merely imitations of it.
Types of Value Proposition……..
We have the lowest prices
Wal-Mart: All Wal-Mart stores and adverts focus on
the fact that Wall-Mart tries to save its customers
money. Even the way in which the stores are
designed reinforces this message to consumers.
Wal-Mart is able charge less provided it receives
higher customer numbers.
We make things easier for you
FedEx: FedEx has the value proposition that it
doesn’t just offer fast delivery; it offers guaranteed
delivery by a specific time. This guarantee makes life
much easier for its customers.
Types of Value Proposition…….. We take ownership of a problem IBM: Global Services division position themselves
as trusted experts in technology who will work collaboratively with you. Essentially, your problem becomes their problem, and your success is their success.
What is the meaning of Product? – Tangible good, service, or idea that satisfies
customer needs
Layers of the Product Concept Core product:
– All the benefits the product will provide.
Actual product: – Physical good or delivered service that supplies
the desired benefits.
Augmented product: – Actual product plus supporting features such as
warranty, credit, delivery, installation, and repair service after the sale.
The Process of Innovation Innovation - A product that customers
perceive to be new and different from existing products.
How Innovation works
Successful innovations spread throughout
the population.
Technology is advancing at a dizzying pace.
New products are expensive to develop and
even more costly if they fail.
New products can contribute to society.
Types of Innovations
Innovations differ in their degree of newness
and can be classified along a continuum in
terms of the amount of disruption/change they
bring to people’s lives.
•Continuous innovations
•Dynamically continuous innovations
•Discontinuous innovations
Continuous Innovations
Continuous innovations – A modification
to an existing product.
– Most common form of innovation
– Consumers don’t need to learn anything new;
change is minimal
– Examples: brand extensions, line extensions
– Knockoffs copy (with slight modification) the
design of an original product
Dynamically Continuous Innovation
Dynamically continuous innovation-A pronounced modification to an existing product. – Requires a modest amount of learning or
behavior change
Convergence-the coming together of two or more technologies to create a new system with greater benefit than its parts
Discontinuous Innovations - A totally new
product.
– Creates major changes in the way we live.
– Consumers must engage in a great deal of
new learning.
– Examples: microwave ovens when first
introduced as an alternative to traditional
ovens.
Developing New Products (NPD)
New-product development is a continuous process of looking for entirely new products or for ways to make an existing product better.
Successfully introducing new products is becoming more difficult – R&D costs are enormous.
– Products become obsolete faster.
– Slotting (Manufacturer charges) fees are high.
Phases in New Product Development
Phase 1: Idea generation – Brainstorming products that provide customer
benefits and which are compatible with the firm’s mission.
Phase 2: Product-concept development and screening – Product ideas are tested for technical and
commercial success.
Phase 3: Marketing strategy development – Developing a strategy to introduce the product to
the marketplace.
Phases in New Product Development
Phase 4: Business analysis
– The product’s commercial viability is assessed in
this phase. Example: business plan
Phase 5: Technical development
– Firm engineers refine and perfect the new product
– Prototypes or test versions of the proposed
product are developed (in R&D department).
Phase 6: Test marketing
– The complete marketing plan is tested in a small
geographic area similar to
the larger market.
Phases in New Product Development
Phase 7: Commercialization
– The new product is launched into the market.
– Full-scale production, distribution, advertising,
and sales promotion are begun.
Example of New Product Development
IdeaPAINT
Phases of NPD
Phase 1: Idea Generation - which came by
brainstorming from a student, Jeff Avallon and
his friends in a study room with walls covered
in Post-it notes.
Phase 2: Concept Development and Testing - they
decided to devise an erasable paint to satisfy
their want. To testify the feasibility of the idea,
they seek help from two professors, a college-
board member and a parent to see if they
believed in the idea and put investment.
Phase 3: After that, they started to find the target
market, not only for school, but also for work
and home. During Marketing Strategy
Development, they need to plan the potential
price, distribution, and marketing budget.
Phases of NPD
Phase 4: Business Analysis – They prepared the
business plan containing Profit goal and
marketing mix strategy.
Phase 5: Product Development - they were going
out of concept but take actions by producing a
prototype.
Phase 6: Test marketing - when IdeaPaint finally
had a prototype, “they had a conversation with
everybody at school, Babson, who could be a
potential customer or user.” When the final
product was ready, they let the school be the
first customer.
Phases of NPD
Phase 7: Commercialization – They introduce
IdeaPaint into the market.
References:
Chan, S. (2010). The New Product Development
Process. (Online).
URL:http://www.entrepreneur.com/magazine/entr
epreneur/2010/march/205056.html (Date Visited:
14/5/2012)
Kotler, P. (2003). Marketing Management.
International Edition. New Jersey, USA: Pearson
Education Ltd.
Tutorial Questions
1. Discuss the new product development (NPD)
process. Cite an example to illustrate the 7
phases of the NPD process.
2. Critically explain the different types of value
propositions. Choose at least one of this type to
apply in one of the businesses in Oman.
3. Describe in your own words the three types of
innovations.
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