To successfully launch a product or service in the global economy, businesses have to rely on carefully researched information which will form a pool of knowledge form which managers will draw guiding principles which will act as the company’s philosophy or approach towards global marketing. Statistics show that between 67 to 95% of new product launches flop, mainly due to marketing reasons. (Czinkota and Ronkainen 2004 pg449) If a company has to survive, it must develop new products so as to maintain or build sales.
Companies do not have to make totally new products. They can: develop new-to-the-world products, new product lines, make additions to existing product lines, improvements and revisions of existing products, repositioning, and cost reductions. Successful new product development requires clear strategic objectives and priority setting and effective execution across the enterprise. This paper endeavors to highlight challenges faced, and approaches that successful companies took in the launching of their new products in the world market.
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This is expected to form a marketing philosophy and strategy for any company the wants to launch a new product. This paper focuses on three main areas. With real life examples it identifies challenges a company faces during the product development process which commences with generation of a product idea and climaxes with launching of the product in the global economy. Secondly the writer shows important ways that technology is used to support the marketing effort. Finally the writer cautions on business blunders that a company can make when launching a product beyond national borders.
New product development is a process that commences with the identification of an opportunity in the market. A need is conceptualized into a product that is developed to take advantage of that gap. Next the idea is screened in the light of the company strategy and resources. The product idea is turned into a product concept that consumers can buy. This can be done by producing a prototype, which is tested under normal or virtual conditions like a simulation. Product concept testing generate enough information to enable the new product development manager to formulate a draft marketing strategy.
The next steps are: product development, market testing and finally commercialization. The job of new product development is not done until ‘the product is in the market, shipped at the right time, delivered to the right customers, and in the right volumes. ’ To achieve this feat the company faces many challenges. At the initial stage, the challenge is to identify an idea that can be turned into a concept that customers can buy. As Kotler says “consumers do not buy product ideas, they buy product concepts.
” (Kotler pg 359) The next challenge comes when the company produces a prototype. It is almost impossible to properly test it. Once the prototype is tested it will have generated enough information to construct a marketing strategy for launching the new product. The challenge at this stage is that market testing would ‘lead to a delay in full scale commercialization and increase the possibility of competitive interaction’. (Czinkota and Ronkainen 2004) The ‘idea stage’ of new product development posses the big challenge-where to find good ideas.
To get ideas the company has to run informal brainstorming sessions between customers and company production employees, allow time off for scouting on pet projects by employees, take apart competitors products and build better ones, and establish an idea vault. Once good ideas are found; Company decision makers can blunder when choosing ideas. On one hand they may commit the drop error where by the company dismisses an otherwise good idea. Or commit a go error whereby company hot shots permit or force a poor idea to move into development and commercialization.
“Some companies shudder when they look back at ideas they dismissed. Xerox saw the novel promise of Chester Carlson’s copying machine, but IBM and Eastman Kodak did not. ” Because product-development costs rise substantially with each successive development stage, companies must have idea screening criteria. Otherwise they stand to make either absolute, partial, or relative product failure, and hence loose money. (Kotler 2003) At the ‘test marketing’ stage the company faces investment cost and risk on one hand and time pressure and research cost on the other.
Because of new product failure rates companies have to do some sort of test marketing. They may resort to laboratory tests which may not realistic in terms of consumer behavior, micro test marketing and forced distribution tests. At Apple: “Apple Computer assumes the worst of its PowerBook customers and submits the consumers to a battery of indignities. It drenches the computers in Pepsi and other sodas, smears them with mayonnaise, and bakes them up in ovens at temperatures of 140 degrees or more to simulate conditions in a car trunk. ” (Kotler 2003)
The test marketing challenge may force the company to decide to roll out without undertaking initial market test preferring to face the risk of a product failure to the risk of loosing distribution or market penetration on a highly successful product. After successfully market testing the product, the company faces the ‘cost’ challenge of full product commercialization. It would be a pity if the company, after all its labors failed to successfully cross this final hurdle. At this stage the company can ill afford a new product that is not effectively introduced, marketed and supported in each market the company competes in.
picture what happened to Sonny Pictures Entertainment: Sony Pictures spent $125 million to make its blockbuster Godzilla, and some $200 million to make sure it was a hit. The huge campaign included billboards and busses, buttons and T-shirts, TV and Radio. Yet the only truly big thing about Godzilla was that it was a big flop. Critics penned the movie and audiences agreed. When Sony’s top brass saw the initial screening and realized Godzilla would be a bomb, they went out and spent even more money on marketing to lure as many movie goers as possible into theaters early.
The gamble paid off. Sony would end up grossing more than the millions of dollars it spent to make and market Godzilla. (Kotler2003) Many other companies have received a lackluster reception by consumers due to failure to properly prepare for this final hurdle. Technology plays a big part during product development. Most functional areas of the company get involved at some time or another. Each area has an information system. All business processes can be integrated into single information architecture called an enterprise system.
With a unified and, an all encompassing information system technology platform that houses data on all the key business processes the company’s capabilities to achieve strategic goals is enhanced. Information technology has helped companies to work jointly with customers and business partners on designing new products or modifying old ones. For example: Extranet enables customers of Cummins Inc. to access updates on their engine orders. Truck manufacturers can view early prototypes for Cummins line of engines and ask for modifications.
Real-time design collaboration tools let Cummins engineers work with customers’ engineers via the web. A customer council reviews all significant updates to the Cummins site. (Laudon and Laudon 2005 pg 60) During concept testing, the product concept is presented to appropriate target consumers and getting their reactions. Web technology has assisted many companies test their product concepts at almost no cost. For example: National Semiconductor has used “applets”-simple multimedia applications written in Java-and parametric search technologies to make its entire product database available on the web.
With the means to track customer searches, National Semiconductor can know when a customer did not find a product. That information helps National Semiconductor shrink the time needed to identify market niches and to develop new products. It is basically high-quality market research-free. (Kotler pg360) The field of Simulation has enabled businesses to produce prototypes that fit the attributes outline in the product-concept statement. By use of sophisticated virtual-reality technology, it is now possible to produce cost efficient prototypes. For example:
Boeing designed its 777 aircraft on a totally digital basis. Engineers, designers and more than 500 suppliers designed the aircraft on a special computer network without ever making a blueprint on paper. Its partners were connected by an extranet enabling them to communicate, share ideas, and work on the design at a distance. A screen shows how difficult maintenance access would be for a live mechanic. Such computer modeling allowed engineers to spot errors that otherwise would have remained undiscovered until a person began to work on a physical prototype.
Avoiding the time and cost associated with building physical prototypes reduced development time and scrappage and rework by 60 to 90 percent. (Kotler 2003 pg366) Legal and ethical implications loom large in today’s business environment. Success in launching a product in the global market requires not only comprehensive fact finding and preparation, but also an ability to understand and fully appreciate the nuances of different cultural traits and patterns. (Czinkota and Ronkainen 2004) An emerging perspective on ethics in multinational business is that ethical behavior provides a competitive advantage.
A firm’s ethical capabilities arise from: knowledge and skills to understand ethical frameworks and respond effectively to cross cultural ethical situations, 2) leadership, teamwork and organizational culture that facilitate ongoing dialogue and leaning about global ethics and 3) human resource systems and other organizational practices that acquire, develop and sustain these capabilities. (Francesco 2005 pg63) Carelessness can lead to costly advertizing blunders as well the many hilarious legal and ethical faux pas that hit the media once in while. For example: On ethical and legal matters,
In an ad with the headline “The water of life,” a man attends the running of the bulls in Pamplona and, after narrowly escaping being trampled, celebrates with a glass of Johnnie Walker Red Label. In many countries, the Pamplona setting raised hackles because people said, “The Spanish don’t know anything about whiskey. ” The ad was a total failure in Germany because to Germans it seemed simply reckless. “Also,” said Jenny Vaughn, worldwide brand director for Johnnie walker, “because of the German animal rights campaigners, you can’t show a gold fish in a goldfish bowl on German television, so a bull run was just not on. ”
Difficulties with language usually arise through carelessness, which is manifested in a number of translated blunders. An advertizing campaign by Electrolux highlights the difficulties in transferring campaigns between markets. Electrolux’s theme in marketing its vacuum cleaners, “Nothing Sucks Like and Electrolux” is interpreted literally in the United Kingdom, but in the United States, the slang implications would interfere with the intended message. Managers also need to be careful of myths and legends. One candy company was ready launch a new peanut-packed chocolate bar in Japan, aimed at giving quick energy while they crammed for exams.
The company then learned about a Japanese folk legend that eating chocolate with peanuts can cause nose bleed. Te launch never took place. (Czinkota and Ronkainen 2004 pg70) To develop a marketing philosophy or approach to new product development a company needs to accumulate a pool of knowledge about the way things are done. Research into how other companies successfully launched their new products and the challenges they faced, would enable the company to develop an effective marketing strategy. It is important to carefully consider each step of the new product development process.
Technology pervades every step of the new product development process. Business functions like marketing, production and the supply chain have information systems integrated together for efficiency in production. It is possible to use simulation to test prototypes as well as conduct cost effective market tests on websites before commercialization of a product. Since the world is becoming a global village and companies have to compete abroad, it is important to have a good understanding of the ethics and legal systems of nations that constitute foreign market so as to avoid careless blunders that may proof costly when launching a new product.
References Kotler, Kotler. (2003) Marketing Management, 11th ed. Upper Saddle River, New jersey, USA: Pearson Education, Inc. Laudon, K. C. and Laudon, J. P. (2008) Management Information Systems: Managing the Digital Firm, Pearson Education, Inc. Upper Saddle River, New Jersey, USA. Czintota, M. R. , Ronkainen, I. A. , (2004) International Marketing 7th Edn. Thompson South Western, Mason, Ohio, USA. Francesco, A. M. , Gold, B. A. , (2005) International Organizational Behavior, Pearson Prentice Hall, New Delhi, India.
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