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New Product Development May 21, 2009

Posted by mariobarreiro in Marketing.
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New products are original products, product improvements, product modifications and new brands that a company generates using its own research and development efforts (Brassington & Pettitt, 2003: 284). The development entails a process, and authors disagree in the number of steps included on it. For instance, Jobber & Fahy (2003: 146) define seven steps; Brassington & Pettitt (2003: 347) detail eight steps while Kotler et al (2002: 501) assign nine steps. However these authors agree in some points and this essay will focus on one of them: Idea generation.

Idea generation is one of the earlier steps of the process, and it can be defined as the systematic search for new product ideas. The sources of ideas are internal sources, customers, competitors and distributors/suppliers/others (Kotler et al, 2002: 503).

 

Internal sources:

Ideas are proposed by directors, employees and R&D departments. There are two possible ways of ideas flow: top-down, where ideas and new projects are created (and usually imposed) by owners, managers and directors; and bottom-up, with an opposite flow from employees to the top of the company (Morris, 2006). Examples of bottom-up innovator companies are Google, Amazon or Toyota.

Google allows its employees to spend 20% of working time to extend products, and 10% to do personal stuff. For instance, the Google News service has its roots in this policy (Weir, 2008). Amazon gives a price to encourage people to share ideas, furthermore, they think is important to do something with them. Moreover, Amazon says that those closest to the problem are in the best position to solve it. Finally, Toyota employees contribute with more than a hundred improvement ideas each year (Morris, 2006).

 

Customers:

Good new product ideas also come from watching and listening to customers.

In Amazon, developers has to spend some time with customer service, listening to customer service calls and answering e-mails to understand the impact of their jobs as technologists (Hoff, 2007).

In 1989 an employee from the United States Surgical met a surgeon who was using a jury-rigged clip to remove gallbladders laparoscopically. Then, she carried the word back to the U.S. Surgical Headquarters, and as a result, by early 90s the company had a basic laparoscopic stapler ready to go. In 1991 more than 60% of gallbladders were removed laparoscopically (Reese, 1992).


Competitors:

Companies can get good ideas from competitors, for instance, watching to ads and communications to get clues.

On the extreme, there is the case of new developments that were discarded by a company and lately used by other reaching a market success (Pang, 2002; Burke, 1999). In the early 80s Steve Jobs, CEO of Apple, visited Xerox’s Palo Alto Research Center (PARC). Xerox executives did not think that a “mouse” device could be useful, and they allowed Apple to see their researchers’ investigations. From that meeting, Apple took the mouse and the graphical user interface (GUI) ideas which they implemented into the Apple Lisa computer.

 

Distributors, suppliers and others:

Distributors are closer to the market than the manufacturer, thus they can pass along information about consumer problems and enquiries. On the other hand, suppliers have contact with many other similar companies, and it can drive to find new opportunities.

There are other sources of ideas in magazines, shows and seminars, and these have not to be necessary from the same industry. For instance, in 1993 Heineken needed a solution to beer contamination created by glass particles. They contact with PA Consulting, which developed a solution inspired by a method used in the pharmaceutical industry to inspect vials (Baxter, 2000).

 

Web Articles:

Films:

  • Pirates of Silicon Valley. 1999. Film. Directed by Martyn Burke.

Books:

  • F. Brassington and S.Pettitt. 2000. Principles of Marketing. 2nd ed. Prentice Hall 
  • D. Jobber and J.Fahy. 2003. Foundations of Marketing. McGraw-Hill Education
  • P. Kotler et al. 2002. Principles of Marketing. 3rd European Edition. Prentice Hall

Product life-cycle May 19, 2009

Posted by mariobarreiro in Marketing.
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The product life-cycle concept refers to the course that a product’s sales and profits take over its life time. It can describe a product class (e.g. laptops), a product form (e.g. designing) or a brand (e.g. Apple Mac Book) (Kotler et al, 2002: 518).

plc 
Brassington & Pettitt (2003: 304) Fig. 8.1

The cycle is divided in five different stages. The first one is the pre-launch stage, where the product is in the developing phase, and therefore there are not sales neither profits. This reflective journal will focus in the other four stages within the cycle: introduction, growth, maturity and decline (Brassington & Pettitt, 2003: 303-308).

 

Introduction

In the introduction stage the product is launched and the sales increase in a slow manner. Usually profits are negative where promotion expenses are high because the company needs to inform the customers about the product. If it is a new product or a new category, they will spend even more money to spread its benefits (Kotler et al, 2002: 520).

Currently, Blu-ray devices can fall under this statement.

The Playstation 3 carries a Blu-ray player and Microsoft is using it as a war tool against Apple, who as well as Toshiba, does not support Blu-ray (Ruby, 2009). By the moment, the sales of players and movies in this format have not increased dramatically.

 

Growth

In this stage sales climb quickly, and the company keeps educating customers and begins to introduce new features to the previous basic product. Competitors will appear due to the new profitable market (Kotler et al, 2002: 521).

Twitter, a micro blogging service, is in this stage right now.

UK Internet visits to Twitter have been increased six times in March 2009, and 32 in the last year (Goad, 2009).

hitwise
Source: http://weblogs.hitwise.com/robin-goad/2009/04/what_would_a_google_twitter_marriage_mean.html

 

Maturity

Once the sales growth slowdowns, the product enters a maturity stage. This stage is usually longer than previous stages but the competition is higher, with prices cuts and more sales promotions. To stay alive, companies need to increase consumption and attract new users. Therefore, they have to innovate in the market (repositioning the brand), modify the product and modify the marketing mix (Kotler et al, 2002: 521).

Innovate in the market

Aquarius was launched in Spain in 1991 as a sports drink and the next year it was the official drink for the Barcelona ’92 Olympics. However in 2005 it was repositioned to a refreshment drink for everyone (http://www.conocecocacola.com/default.cfm)

Modify the product

With games such as Brain Training, Nintendo reached the market of mature people who have never played video-games with its portable Nintendo DS.

Modify marketing mix

Mobile phone industry is an example of marketing mix modifications. Companies have created packages of minutes and texts adapted to the requirements of each user.


Decline

Finally, the sales dip because of customers and profits decrease, and eventually companies withdraw from the market. However, sales not always plunge to zero (Kotler et al, 2002: 523).

For instance, the Playstation 3 was launched at the end of 2006, and in January 2009 Sony has announced a price cut in Playsation 2, which is still making sales (Archer, 2009).

 

To sum up, the product life-cycle is a tool for marketers to try to understand which marketing policy the company should follow in each stage (Jobber & Fahy, 2003: 134).

As a result, there are tools like HammerTap (http://www.hammertap.com/) which helps ‘eBuyers’ and ‘eSellers’ (people that buy and sell through eBay) to know which products are hot or not (which stage in the cycle), allowing them to improve profits and save costs following the most suitable strategies to sell and buy.

 

hammertap
Source: http://www.hammertap.com/

Web Articles:

Books:

  • F. Brassington and S.Pettitt. 2000. Principles of Marketing. 2nd ed. Prentice Hall
  • D. Jobber and J.Fahy. 2003. Foundations of Marketing. McGraw-Hill Education
  • P. Kotler et al. 2002. Principles of Marketing. 3rd European Edition. Prentice Hall

Product Range Brand Policy May 16, 2009

Posted by mariobarreiro in Marketing.
4 comments

Within the Marketing Mix, a very important item that makes up the product is branding. A brand, with its name, design, style, words or symbols, emphasizes a product as a unique article, making it different to customers from other products in the same segment (Brassington & Pettitt, 2003: 275).

One of the concepts that branding strategy develops is the role of the company name and its relationship with the product range. Brassington & Pettitt (2003: 284) call this the “product range brand policy”. The strength of the association between the mother/family/company brand and the product brand has benefits and drawbacks. There are three approaches: discrete branding, monolithic branding and endorsed branding.

 

Discrete branding

In this case, each product receives and individual/independent name, which is not related to the company name. This strategy has the advantage that the firm can launch several brands to cover each segment of the market. However, it usually means higher marketing costs that can drive to less profitability. Jobber & Fahy (2003: 134) refer to discrete branding as “individual brand name”.

Examples of discrete branding can be found in Cif and Domestos (Procter and Gamble multi-purpose cleaners), Chevrolet, Pontiac or Cadillac (General Motors cars) and Kit-Kat (Nestle, launched by Rowntree in 1935).

 

Monolithic branding

At the opposite side, under the monolithic approach, the brand uses a family name, normally the company name, followed by a name that identifies the product range. The positive points are that the communication of the company is only one, and the attributes and values of the family brand benefit all brands. Nevertheless, in case of failure of one product, the whole brand will be affected. Monolithic branding is also known as “family brand name” or “umbrella branding” by Jobber & Fahy (2003: 134).

Several companies use this strategy. BMW precedes the model number of each car to build every name (BMW X3, BMW Z4, BMW M5). The Virgin Group companies have ‘Virgin’ at the beginning of every name (Virgin Atlantic, Virgin Balloon Flights, Virgin Megastore USA).

 

virgin

Virgin Companies.
Source
: http://www.virgin.co.uk/home.aspx

 

Moreover, many technology corporations nowadays follow this approach:

–          Microsoft: Microsoft Windows, Microsoft Office, Microsoft Encarta.

–          Google: Google Mail, Google Chrome, Google Earth.

–          Apple with its ‘i’: iTunes, iPod, iPhone, iBook.

 

Endorsed branding

This is suited between the monolithic and discrete branding. The endorsed approach uses the family name and the individual product name, which is the dominant. There are two different ways to apply it: fixed endorsed and flexible endorsed.

On one hand, in the fixed endorsed there is a rigid relationship between the company name and the product brand. For instance, Ford does it with models such as Mustang. It is referenced by people using either the model brand or the whole name (Mustang or Ford Mustang).

On the other hand, the flexible endorsed gives more freedom to the brand. For example, the Unilever division of Ice creams, Heartbrand, contains brands such as Magnum, Cornetto or Solero. All of them include the Heartbrand logo, but they have their own marketing campaigns and target markets. Furthermore, this could be understood as a third level. In the middle, there is the name of the local brand on each country, covered by the umbrella of the Heartbrand logo. Thus, what for the British customers is Wall’s, for the Spanish ones is Frigo, or Olá for the Portuguese.

 

Unilever –> Heartbrand logo with local brand name –> Final independent products

walls
Unilever Heartbrand logos.
Source:
http://www.cidadedoslogos.com/news/index.php/2008/04/02/o-heartbrand-da-unilever/

 

heartbrand Heartbrand independent Brands.
Source: http://www.walls.co.uk/uk_en/products/default.aspx

 

 

 

 

The main benefit of endorsed branding is the brand credibility, although as well as discrete branding, it uses to generate higher marketing costs.

Web Articles:

Books:

  • F. Brassington and S.Pettitt. 2000. Principles of Marketing. 2nd ed. Prentice Hall
  • D. Jobber and J.Fahy. 2003. Foundations of Marketing. McGraw-Hill Education

University has finished May 16, 2009

Posted by mariobarreiro in Dundee.
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I had officialy finished my first second year at the University. I used to say that it was my first second year as I got directly into the second year, thanks to my other studies and background. Anyway, I will be back for the third.

Throughout the whole season I had discovered and understood different subjects which were into my mind the previous years. Probably the most exciting was Macroeconomics, which is on the mouth of every politician these days due to the credit crunch, financial crisis or whatever it is called.

A global picture is in my mind about how Macroeconomics works and now it is time to jump to the next stage and try to understand how the global system can be fixed and which rules have to drive it.

Marketing was another subject I was working with. It helped to review all the concepts I was working with in my previous studies of Marketing, and several books were over my desk in the last two months. I think that Marketing should be a mandatory module even in school. It is so easy to be cheated!

Regarding to Markerting, we needed to make ten reflective journals with the concepts we reviewed every week. I will post all of them in the following days. Maybe they are helpful in the future for someone.