NEW PRODUCT DEVELOPMENT

MKTG1HM
New-Product Development Strategy

 Two ways to obtain new products

Acquisition refers to the buying of a whole

company, a patent, or a license to produce
someone else’s product

New product development refers to original

products, product improvements, product
modifications, and new brands developed from
the firm’s own research and development
New-Product Development Process

Major Stages in New-Product Development

 New-Product Development Process
 Idea Generation
Internal sources refer to the company’s own
formal research and development,
management and staff, and intrapreneurial
programs
External sources refer to sources outside the
company such as customers, competitors,
distributors, suppliers, and outside design
firms
New-Product Development Process

 Idea Screening
 Identify good ideas and drop poor ideas
 R-W-W Screening Framework:
Is it real?
Can we win?
Is it worth doing?
 New-Product Development Process
 Concept Development and Testing

Product idea is an idea for a possible product

that the company can see itself offering to
the market
Product concept is a detailed version of the idea
stated in meaningful consumer terms
Product image is the way consumers perceive
an actual or potential product
New-Product Development Process

 Concept Development and Testing

Concept testing refers to testing new-product

concepts with groups of target consumers
New-Product Development Process

 Marketing Strategy Development

 Marketing strategy development refers to the
initial marketing strategy for introducing the
product to the market
This consists of three parts:
Part 1: target market, planned product positioning, sales and
profit goals

Part 2: price, distribution and marketing budget

 
Part 3: planned long run sales (timetable), marketing mix
strategy, contingency plans
New-Product Development Process
 Business Analysis

- this will be the analysis and

evaluation of costs, sales, and
profits. If the product will satisfy the
company’s objectives in terms of
saleability, and viability
New-Product Development Process
 Product development

– if the product passes the Business

Test, the company will then move to
developing more than one physical
versions of the product concept
(prototype)
New-Product Development Process
 Test marketing
Test marketing is the stage
at which the product
and marketing
program are
introduced into more
realistic marketing
settings

Provides the marketer

with experience in
testing the product
and entire marketing
program before full
introduction
New-Product Development Process

Commercialization

Commercialization is the introduction

of the new product
 When to launch
 Where to launch
 Planned market

rollout
2nd P: PRICING

PRICE
the amount of money charged for a good or
service; more broadly, price is the sum of values
consumers exchanged for the benefits of having or
using a product or service.
2nd P: PRICING

Price may go by many names,

depending on the company or product:

Rate- for rooms in hotels

Fare – for transportation services
Tips – for extra services rendered
Toll – price for using a special highway
 2nd P: PRICING
FACTORS TO CONSIDER WHEN SETTING PRICE
1. Internal Factors
a. Marketing Objectives
b. Marketing Mix strategy
c. Costs
2. External Factors
a. Nature of market and demand
b. consumer perception of price and value
c. analyzing the price-demand relationship
d. price elasticity of demand – buyers are less price sensitive if
products are unique, hard to find, a prestige or luxury brand, or
when substitute products are non-existent
e. competitors’ price
2nd P: PRICING
PRICING STRATEGIES
1. Prestige pricing – hotels and restaurants seeking to position
themselves as luxurious and elegant will enter the market with
a huge price that will support this position
2. Market skimming pricing – setting a high price when the
market is price insensitive
3. Marketing-penetration pricing – setting a low initial price to
penetrate the market quickly
4. Product-bundle pricing – combining products and offering
the bundled products at reduced price
2nd P: PRICING
PRICING STRATEGIES
5. volume discounts – special rates or prices for large quantity
purchases
 
6. discounts based on time of purchase– lower prices when the
demand is low (hotel rates during off-peak season) special discounted
rates on advance bookings (example: airline rates)

7. psychological pricing – aspects like prestige, round figures and

ignoring end figures (ex.: quoting prices in US dollars give a sense of
prestige; pricing of 1.99 instead of 2.00)
 
8. Promotional pricing – temporary pricing at lower figures for special
occasions (sale prices, festivity-based, etc)
2nd P: PRICING

Special Pricing Consideration in the Hospitality

Industry:
The restaurant industry historically employ a rule
of thumb that the highest-priced entrée should be no
more than 2.5 times as expensive as the lowest-
priced entrée.
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