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Marketing Management Chapter 9: New Products

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For a complete list of all chapters so far, you can visit the Marketing Management Tab on the blog!

Chapter 9: Summary

The theory of new products or new services starts with a gap analysis, which looks to the following: (1) usage gap, (2) distribution gap, (3) product gap, and (4) competitive gap. In practice, much organizational development effort is devoted to the modification of existing successful products or services by feature modification, quality modification, style modification, and image modification. Potential new products need to be screened against a number of strategic dimensions, including production capabilities, financial performance, investment potential, human factors, materials supply, cannibalism, and time. Market factors, such as matching with existing product lines, price and quality, distribution patterns, and seasonality, also need to be considered.

Sources for generating new product ideas include customers and innovative imitation. In the Western approach, the product development process then is supposed to follow a number of formal steps, including gap analysis (for scanning and idea generation), strategic screening, concept testing, product development, product testing, test marketing, and product launch. A test market may take place in a television-viewing area, a test city, or a residential neighborhood. In industrial markets in particular, it may be restricted to test sites. All these approaches pose problems of effectiveness and cost, while possibly offering competitors advance warning.

It is worth remembering the major caveats mentioned in section 9.1, “Introduction.” Brand stability implies that there should be more emphasis on the further development of existing brands than on totally new ones, contrary to conventional teaching. The Japanese approach is to launch many new products without following any of the stages of testing described here.

Marketing Management Chapter 4: Understanding the Buyer

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Chapter 4: Summary

Focus on the buyer is the key dimension of marketing and is what sets the discipline apart from all other business fields. The marketer must therefore understand how buyers come to the decision to purchase a product. This decision-making process is a complex one, both for consumers who are end-users and for industrial buyers. For consumers, the process includes the effects of experience, lifestyle, promotion, and price. More general factors influencing consumers may be culture, geography, social class, occupation, psychological factors, peer pressure, and the effect of globalization. Marketers have conducted a great deal of research to understand the consumer decision process better and, as a result, have developed the tools of lifestyle analysis and segmentation to be able to serve consumers more efficiently and more profitably.

On the industrial side, organizational purchasing is subject to a different set of influences, both because it is usually based on derived demand and because the decision is often split between decision-makers and influences. Other factors that affect buyers’ product acceptance are the diffusion of innovation, usage, and loyalty, and the existence of a customer franchise.

Marketing Management Chapter 3: Understanding the Market Environment and the Competition

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Chapter 3: Summary

An understanding of the environment is important for the marketer. Social, technological, economic, political, and ecological factors can have a major impact on the firm’s opportunities and threats. Key social and cultural elements to consider are the redefinition of occupations, a societal trend toward postmaterialism, and major demographic shifts. In the area of technology, the outlook for marketers is likely to be thoroughly changed by transformations in information processing and the subsequent shifts in business practices as well as the emergence of new materials, new biotechnological products, and growing environmental concerns. In the economic area, increasing globalization, regional integration, and exchange rate effects represent major influences on marketing practice. The political environment is characterized by legislative and regulatory actions that influence the firm but that can also be influenced by the firm. However, the political arena is also increasingly defined by the activities of special-interest groups whose actions can have a major effect on firms. Furthermore, the marketer is likely to be required, either by regulation or by good marketing sense, to take into account various stakeholders beyond the shareholders if the firm and its products are to remain acceptable to society at large. The ecological background of the target market also needs to be considered, in order to satisfy contemporary ethical customers.

To deal with the environment, the firm must first analyze and understand it. Such analysis can be accomplished by environmental scanning, Delphi studies, and scenario building. To understand the competition, however, the firm must evaluate more specific issues such as market structure, products and production processes, and industrial changes taking place.

After understanding these dimensions, the firm can achieve a successful strategic position through economies of scale, political clout, and captive distribution systems. Firms that are unable to win the competitive battle in the field of commerce, in particular, are increasingly seeking victory in the halls of government. Building and maintaining a successful position also requires an understanding of the likely competitive response from adversaries and the different strategies that leaders and followers can employ. Overall, you should remember that as difficult as it may be to maintain a leadership position, it is even harder to be a profitable follower.

Marketing Management Chapter 2: Marketing Planning

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Chapter 2 Summary: Marketing Planning 

Summary

In general, the use of plans conveys a number of advantages: (1) consistency, (2) responsibility, (3) communication, and (4) commitment.

The corporate plan should contain three main components: Where the organization is now? Where the organization intends to go in the future? How it will organize its resources to get there?

Corporate objectives, which are usually more complex than just financial targets, should reflect the corporate mission (including customer groups, customer needs, and technologies), which may reflect a strong corporate vision.

The starting point of the marketing planning process is the marketing audit, the output of which may be one or more facts books, covering a wide range of questions about internal (“product”-related) and external (“environmental,” as well as market) factors, and the marketing system itself, as well as the following basic questions:

Who are the customers? What are their needs and wants? What do they think of the organization and its products or services?

This step will lead to the production of marketing objectives and subsequently to marketing strategies (typically covering all elements of the Price, Product, Place, and Promotion).

A suggested structure for the marketing plan document itself might be as follows:

  1. Mission statement
  2. Summary of performance (to date, including reasons for good or bad performance)
  3. Summary of financial projections (for three years)
  4. Market overview
  5. SWOT analyses of major projects/markets (Strengths, Weaknesses, Opportunitites, Threats)
  6. Portfolio summary (a summary of SWOTs)
  7. Assumptions
  8. Objectives
  9. Financial projections for three years (in detail)

All these detailed plans should be, as far as possible, (1) number-based and “deadlined,” (2) briefly described, and (3) practical. These programs must be controlled, particularly by the use of budgets, for which the overall figures may be derived by (1) affordable, (2) percentage of revenue, (3) competitive parity, or (4) zero-based budgeting.

Finally, the actual performance of the marketing strategy needs to be examined. The most important elements of marketing performance are (1) sales analysis, (2) market share analysis, (3) expense analysis, (4) financial analysis, and (5) relationship analysis. Although much of the relationship analysis may not be quantifiable, it has become an increasingly important determinant of a company’s long-term success.

The Colonial Pipeline: Prepare for the Unexpected

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Hello everyone! I would like to share this new commentary of mine that was recently published in The Hill and MSN among others. I hope everyone has enjoyed a safe Memorial Day weekend.

Prepare for the Unexpected

Michael R. Czinkota

     Music aficionados connect the month of May with Mozart’s minuet written as a five year old” komm lieber Mai und mache…,” but for many Americans this year the link came from a curtailment of gas It was reported that almost 80 percent of fuel depots in Virginia and North Carolina were running on empty. Lines of cars seeking gas quickly brought back eerie memories of the 1970s.

    That shortfall is said to stem from private sector adversaries who had successfully shut down the flow of liquid energy. The result was a major decline in distribution capacity, particularly of Colonial Pipeline. Evildoers apparently had employed software manipulations to severely disrupt fuel flow. They informed their targets that this ransomware disruption would prevent the flow of gas until a large payoff had been made. The amount ranged between 5 to 20 million dollars. Colonial could not reverse the impact. Payment was allegedly made, and the energy flow was slowly restored.

    A lack of gas sounds bad enough, but it may be only one of simultaneously appearing evils. If the action was meant to distract, what was the issue to be covered up? What nation gets the next turn? If this was just a preparation for future malfeasance, what obligations will arise and how costly will they be? When taking off shoes as a security precaution at an airport, it is not just the action that matters but rather the rationale and background that makes such actions necessary.  Research at Georgetown has clearly indicated that the long-term indirect effects of terrorism far outweigh the short-term direct ones. When combining all these cost factors one can conclude that somewhere someone is cooking our goose and we struggle to protect limited targets and save up the ransom money.

    We need to find and combat the culprits of such threats, and often it is us. With all our elegant computerization and artificial intelligence, we have largely lost control of management capabilities both at work and at home. At the same time, we are increasingly exposed to sudden shifts in our lives. We often work without backup with rising risk. Only five years ago, who would have prepared for a large and convenient “home office”? Many of us encounter a lack of clarity in communication that weakens our capabilities The Covid-based loss of one whole school year will offer serious repercussions for years to come.

    Here is a collateral damage example. My family went to dinner leading up to an outdoor performance. We had explained our plans well in advance, including the dinner timeline so that we would be punctual. The time came and went, but no hosts were in sight. We knocked on the kitchen door where we found waiters in distress. As they told us, the computer did not perform and they did not know how to directly deal with pricing, adding, and allocating meal expenses to guests. What a pity!

    We need an annual event devoted to catching up. That time would help us to see and test the shortfalls in our understanding of processes. Flipping a switch or pushing a button should alert the system that attention is needed. Those on the controls need to know why they have just undertaken a measure and what it does. We need to remember what we may have forgotten. We must recall with a personal, replicable event the rationale, causality, and linkages of our actions. Doing so will greatly strengthen our capabilities to plan, understand, and reduce risk exposure.