Core Concepts of Marketing by John Burnett - HTML preview

CHAPTER 7

INTRODUCING AND MANAGING THE PRODUCT

AD 7.2

The "Got Mi lk" campaign ma de an old product new.

1. Mergers and Acquisitions. Acquiring another company already successful in a

fi eld your company wishes to enter

an effective way of introducing products

while still diversifying. Research suggests that mergers and acquisitions can take

place between companies of various sizes and backgrounds, and that fi rst expe-

riences with th is process tend to be less than satisfactory. Even large marketers

such as General Motors engage in acquisitions.

PRODUCT PLANNING AND STRATEGY FORMULATION

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2. Licenses and Patents. A patent, and the related license, arise from legal efforts

to protect property rights of investors or of those who own inventions. A patent

is acquired from the U.S. Patent Office and provides legal coverage for a period

of seventeen years, which means all other manufacturers are excluded from mak-

ing or marketing the product. However, there are no foolproof ways to prevent

competition. There are two main types of patents: those for products and those

for processes. The first covers only the product's physical attributes while the lat-

ter covers only a phase of a production procedure, not the product. The patent holder

has the right to its assignment or license. An assignment is any outright sale, with

the transfer of all rights of ownership conveyed to the assignee. A license is a right

to use the patent for certain considerations in accordance with specific terms, but

legal title to the patent remains with the licensor.

3. Joint Ventures. When two or more companies create a third organization to con-

duct a new business, a joint venture exists. This organization structure emerges,

primarily, when either the risk or capital requirements are too great for any sin-

gle firm to bear. Lack of technical expertise, limited distribution networks, and

unfamiliarity with certain markets are other possible reasons . Joint ventures are

common in industries such as oil and gas, real estate, and chemicals, or between

foreign and domestic partners.

Joint ventures have obvious application to product development. For exam-

ple, small firms with technological resources are afforded an opportunity to acquire

capital

marketing expertise provided by a larger firm.

The New Product Development Process

Evidence suggests that there may be as many varieties of new product development sys-

tems as there are kinds of companies. For the most part, most companies do have a formal

comprehensive new product development system, and the evolution of such systems were

not necessarily the result of systematic planning. The list of activities suggested in Figure

7.5 illustrates the extensiveness of this process. Because of the complexity of the process,

it is important that the general guidelines of effective management be applied to new prod-

uct development. 13

Before starting our discussion of the eight-step process of new product development,

a necessary caveat should be considered: a great many new products fail. Depending on

definitions used fol' products actually introduced, failure rates range between 20 percent

and 30 percent, but have been as high as 80 percent. Of more concern than the level of fail-

ure are the reasons for failure . Possibilities include: technical problems, bad timing, mis-

understanding the consumer, actions by competitors, and misunderstanding the environment.

Step 1: Generating New Product Ideas

Generating new product ideas is a creative task that requires a specific way of thinking.

Gathering ideas is easy, but generating good ideas is another story. Examples of internal

sources are

1. Basic research: many companies, such as DuPont, have several scientists who are

assigned the task of developing new product ideas and related technology.

2. Manufacturing: people who manufacture products often have ideas about modi-

fications and improvements, as well as completely new concepts.

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