Delivering Customer Value - Assignment Example

Delivering Value Table of Contents Q1 Development of New Products 3 a. Importance of the Development of New Products within an Organisation 3 b. Analysis of the Stages of New Product Development for a Product 9 Q2 Pricing 10 a. Factors Affecting the Marketer’s Pricing Decisions For a Consumer Product 10 b. Influence of Marketing Mix Variables on Pricing Decisions 11 References 13 Q1 Development of New Products a. Importance of the Development of New Products within an Organisation New product development is an innovative and interdisciplinary activity, which transform better market opportunity to an organisation. The current global marketplace is characterised by rapid technological changes and continuous innovation, which have exerted a massive influence on new product development initiatives for business organisations. Clearly, highly competitive marketplace can be seen to force an organisation to develop and deliver superior quality products that facilitate it with increased performance in a least possible time at a lower cost. In a view of that, it can be firmly asserted that there is a continuous requirement for developing new products that are cost effective and at the same time possess high quality characteristics (Liu, 2003). In order to develop a successful new product, it is required to have a structured approach towards new product development. . However, initiatives of an organisation to develop and deliver new product at time result in failure causing heavy financial loss. In this regard, one of the major reasons behind the failure is associated with the poor development and delivering process. This implies that product development process in some organisations relies heavily on trial and error methods rather than embracing structured and scientific procedures. This is where the importance of product lifecycle (PLC) models can be identified (Owens & Davies, 2000). The product life cycle (PLC) concept can be asserted as a marketing strategy and planning tool. The concept is actually based on the stages over a product’s life. Over the years several PLC models have been developed. The approaches of PLC concept are based on some key consumer trends during product evaluation and market evaluation. In general, PLC generally incorporates four elements to include innovation, imitation, repeat and substitute (Steffens, 2002). Figure: 1 Four Key Consumer Trends of Product Life Cycle In accordance with Steffens (2002), the traditional PLC concept suggests the four stages. Those are introduction phase, growth phase, maturity phase and decline phase. When a product is introduced for the first time in the market place, that stage is known as introduction phase. Subsequently, when the consumers become more familiar about the product and start choosing the products among various alternatives, that stage is termed as a growth phase. Next, the stage when the product gains the highest market share among others that phase is usually known as maturity phase. During this phase, the consumer demand for the particular product is at peak. Finally, after a certain period, the particular product meets the saturation level of consumers and consequently, consumers reflect losing interest. This phase is known as declined phase and during this stage, demand for a particular product starts declining (Soltani, 2012; Steffens, 2002). Figure: 2 Four Stages of Product Life Cycle (Soltani, 2012) On the other hand, in accordance with Komninos (2002), PLC model usually helps an organisation to understand and analyse the perfect timing of introduce or withdraw a product from a market place. Apart from this, it also helps to determine the position in the market compared to its competitors. Moreover, it also helps to realize the product’s success or failure in a particular market place. Komninos (2002), has segmented the PLC in five major steps such as product development phase, introduction phase, growth phase, maturity phase and decline phase (Komninos, 2002). Figure: 3 Five Stages of Product Life Cycle [Source: Komninos, 2002] In these five-stage of PLC model, it has been identified that introduction, growth, maturity and decline phases are similar to four phases of PLC discussed earlier. Notably, product development phase can be seen as an additional to previously discussed product life cycle model. According to Komninos (2002), product development phase begins when an organisation discoveries and cultivates a new product idea. This process involves developing ideas based on wide range of information. Finally, those information and ideas are transformed into a new product. After that, the product is introduced to the marketplace among the target customers. During the product development stage an organisation is required to perform certain activities such as market research, monitoring competitors, planning, research and development among others Another widely used PLC model includes seven-stage model, which include new product development, introduction, growth, maturity, saturation, decline and withdrawal among others. In this regards, it has been identified that introduction, growth, maturity, and decline phases of this model coincide with the two PLC models discussed earlier while the model also incorporate the distinct phase of new product development that relates predominately with the previously discussed second model. Notwithstanding, two additional phases namely saturation and withdrawal can be identified to distinguish this model with the rest of the PLC models discussed earlier. In case of saturation period, it is observed that the sales volume of the product decreases, which in turn have direct effect on the market share and profitability. Similarly, during the withdrawal phase the product is withdrawn. Figure: 4 Seven Stages of Product Life Cycle Based on the above discussion, it can be stated that the PLC models reflect the imperative phases of product development beginning from conception to delivery along with the sequence of order in which the models are applied. PLC models are extremely important for new product development as it provides designers with structures related to developmental activities. In accordance with the Association of Chartered Certified Accountants (2014), the Boston Growth Share matrix (BCG) is a tool through which the organisations used to evaluate its position in the market place in terms of its product portfolio and market share. Apart from this, the BCG matrix also helps an organisation to make further decisions about whether the company will develop new product (Association of Chartered Certified Accountants, 2014). Figure: 5 Boston Growth Share Matrix [Source: FAM99 – Frameworks and Models, 2012] In case of BCG matrix, it has been observed that “Stars” denote high market share along with high growth rate. Similarly, “Question Marks” denotes low market share but high growth rate. On the contrary, “Cash Cows” denotes high market share but low growth rate. Simultaneously, “Dog” denotes low market share along with low growth rate (Association of Chartered Certified Accountants, 2014). Apart from this, it has been revealed that in case of success situation a particular company denotes low market share and high growth rate during the introduction phase. Along with time, the company moves in to the stars position in BCG matrix during its growth/ maturity phase. Finally, cash cow position during the saturation/ decline phase is reached. Whereas, during the disaster situation a company is position either stars/ cash cow in the introduction phase and eventually it lands up on dogs during the maturity/ decline phase. Stars Question Marks Cash Cows Dogs Disaster situation Success Situation Figure: 6 Success and Disaster Sequences in the Product Life Cycle & BCG Matrix In order to have better comprehension regarding the stages of PLC, it would be vital to consider an example. Thus, a body care product as a new product has been taken into consideration. During the course of developing a body care product, it would be vital to execute a thorough market research in order to assess the customer’s needs and the economic condition of the market. Identifying competitors and their strategies is one of the key factors during new product development. The ideas generated through the market research can be subsequently used in designing and developing the body care product. Next, i.e. introduction phase would require engaging in extensive advertising and promotional activities. With respect to the example, in order to promote the body care product, it will require to conduct advertisement campaign and use of various other promotional tools to grab the interest of potential customers. Apart from this, during the growth phase of the body care product considerable emphasis is need to be placed on sales and distribution of the product. Subsequently, during the maturity phase, firms need to emphasise maintaining attaining competitive edge. Eventually, after the maturity phase saturation phase can be observed in case of product life cycle, which confirms the decline stage for a product. During this phase, organisation needs to cultivate and implement innovative ideas in order to sustain the product in market place. In the decline phase, it is vital to engage in identifying other product ideas that can replace the body care product. During the withdrawal phase, the body care product can be withdrawn from the market place, which can be replaced by other similar product. b. Analysis of the Stages of New Product Development for a Product According to the study, it has been observed that in order to ensure long term sustainability, an organisation is require to concentrate on the new product development. In this regards, new product development is a continuous process for sustaining business and remaining viable at the market place. It is further observed that each stage in PLC is extremely important for an organisation. The stages in PLC can be identified to provide designers and marketers with systematic and structural support in relation to new product development and delivery of the same. It can be asserted that product development and delivery does not end with designing and introducing the product in a market place. Correspondingly, the stages in PCL have considerable, influence on the overall performance and its market share. Notably, growth phase for a body care product defines the low market share but high growth rate in a particular market place. Whereas, it can be asserted that in case of maturity phase the body care product reflects high market share along with high growth rate in terms of sales and profitability. On the contrary, decline phase defines the low potential in terms of market share and portability in case of a body care product (Degeneffe, 2012). Q2 Pricing a. Factors Affecting the Marketer’s Pricing Decisions For a Consumer Product Pricing plays an important role in case of consumers buying behaviour and decision making process. Similarly, unethical pricing may affect marketers while positioning their product in the market place. It can be also asserted that few financial and economic issues can affect marketers during pricing decision making. In order to highlight the financial and economic factor, it can be asserted that the economic strength of the market and inflation situation can affect the pricing decision. According to study, it has been revealed that the marketers can use premium pricing if the economic condition of the market is stabled and there is no substitute for it. On the other hand, in case of under stabilized economy marketers cannot impose premium-pricing strategy. Instead, marketers can apply price leadership strategy in order to capture more number of market shares. Thus, it can be asserted that buying potential of the customers and economic strength of the market can affect the marketers pricing decision (Musonera & Ndagijimana, n.d.). On the other hand, income level of the consumers in a market place can affect the pricing decision of the marketers. According to the study, it has been identified that low-income level of consumers may force marketers to apply marginal-cost pricing in a particular market place. Whereas, high income level of consumers may offer marketers to apply market-oriented pricing strategy. Thus, it can be evidently asserted that income level of consumers can affect marketers during making pricing decisions (Musonera & Ndagijimana, n.d.). Apart from this, it can be asserted that marketers must consider internal factors in order to make pricing decisions. According to the study, it has been revealed that body care product pricing is heavily depended on the productivity of the manufacturer and manufacturing facility of the produces. For instance, it can be asserted that productivity depends on the financial strength of the firm. Investors can ensure productivity flow of fast moving consumer goods by ensuring smooth flow of working capital. On the other hand, availability of raw materials can ensure continuation in terms of production. Thus, it can be apparently affirmed that internal factors such as ability of the firm to meet the financial needs for developing and promoting new product can affect marketers during making pricing decisions. On the contrary, external factors such as existing competitors’ position in the market and entrance of new player in the market place can also affect marketers during making pricing decisions (Musonera & Ndagijimana, n.d.). b. Influence of Marketing Mix Variables on Pricing Decisions Marketing mix variables such as product, place and promotions can affect pricing decisions of marketers. In case of body care product if the quality of the product is excellent then marketers can apply odd pricing strategy in order to enhance the profitability. On the other hand, if the quality of the body care product is ordinary then marketers can decide to price its product according to price leadership strategy. As an example, Amway’s body care products can be ascertained to be superior in terms of quality than that of its competitors. Thus, the firm has applied odd pricing strategy. Whereas, other companies are applying price leadership strategy in order to in order create demand for its products and sustain their business (Musonera & Ndagijimana, n.d.). Similarly, promotion can also influence the pricing decision in case of body care products. High-level promotional strategies enhance the cost of the marketers, which can also affect directly on the pricing decision of a product. Simultaneously, place can also affect directly on the pricing decisions. In case of rural marketing, marketers apply different pricing strategy. Apart from this, it can be asserted that the competitors’ pricing can also affect the pricing decisions for the marketers in case of body care products. Thus, it can be evidently affirmed other variables of marketing mix have considerable influence on the pricing decision of marketers (Musonera & Ndagijimana, n.d.). References Association of Chartered Certified Accountants, 2014. BCG Matrix. Boston Consulting. [Online] Available at: http://www.accaglobal.com/content/dam/acca/gb/graduates/boston_consulting.pdf [Accessed 10 July, 2014]. Degeneffe, D. J., 2012. New Product Development Process. Consumer Centric Solutions LLC. [Online] Available at: http://faculty.apec.umn.edu/bsenauer/documents/9-11%20New%20Product%20Develpment%20Process.pdf [Accessed 10 July, 2014]. FAM99 – Frameworks and Models, 2012. Growth Share Matrix. Portfolio. [Online] Available at: http://www.fam99.com/portfolio/fam_003_growth-share-matrix/ [Accessed 10 July, 2014]. Komninos, I., 2002. Product Life Cycle Management. Urban and Regional Innovation Research Unit, pp. 1-26. Liu, B., 2003. Product Development Processes and Their Importance to Organizational Capabilities. Massachusetts Institute of Technology, pp. 1-82. Musonera, E. & Ndagijimana, U., No Date. An Examination of Factors that Affect Pricing Decisions for Export Markets. The Journal of Global Business Management, pp. 1-10. Owens, J. D. & Davies, J., 2000. The Importance of a New Product Development (NPD) Process: Getting Started. 1st European Conference on KM, Bled School of Management, Bled, Slovenia, pp. 1-12. Soltani, S., 2012. Strategic Marketing Plan in Product Life Cycle. Business Economics and Tourisms, pp. 1-90. Steffens, P., 2002. The Product Life Cycle Concept: Buried or Resurected by the Diffusion Literature? Academy of Management Conference, Technology and Innovation Management Division, pp. 1-29. Read More