MARKETING AND INNOVATION – A CLASSICAL VIEW

2

THE MARKETING CONCEPT

Marketing is a set of exchange processes developed to reach the objectives of the organization by the satisfaction of the needs of the other part of the exchange

The Marketing Concept is the basic philosophy which underlies theses processes and insure their coherence

3

MARKETING AS EXCHANGE

Customer Supplier

Exchange context

Objects of the exchange

4

MARKETING MANAGEMENT

Marketing Management refers to the first and still dominant conceptualization of Marketing

It emerged in American universities in the 50-60’s,popularized by authors like Mac Carthy, Drucker or Kotler

Subsequent research demonstrated that it was mainly influenced by B2C situations

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MARKETING MANAGEMENT PATH

1. Discover the need2. Conceive a product to fulfill the need3. Test this product and improve it4. Sell the product

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MARKETING MANAGEMENT PARADIGM

Segmentation – Targeting – Positioning Marketing Mix – Four P’s Planning process

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LIMITS OF THE PARADIGM

Mainly dependant on products Mainly concerned with standard products Mainly related to consumer markets

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B2B MARKETING

Inter-organizational exchange Two implementation

Marketing Management approach Specific marketing due to a special relation with the

customer Long term relationship Co-conception, cost sharing, etc. Network, ie the customer can be supplier

SERVICE MARKETING

A service is intangible, non storable, non standardized

Customer takes part in the service production process

Centrality of notions like « service quality », « trust » toward the provider or « loyalty »

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FROM TRANSACTION TO RELATION

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Marketing Management

Transaction focused

Importance of the relation

B2BMarketing

ServiceMarketing

RelationshipMarketing

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MARKETING EVOLUTION

Before Marketing Consumer Marketing Service and B2B Marketing High Technology Marketing

Sell the product

Match the need

Create a relation

Create new needs

CONCLUSION

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WHAT MARKETING IS SUPPOSED TO DO …

“ … create value for customers and prospects; for companies, channels and distributors; for shareholders; and for economies, societies and, yes, even governments and trading partners … “

“If we start to think about marketing as value creation, it promotes a different mindset among those who practice it, manage it, approve it as an organizational activity and enjoy the benefits.”

Source: Don E. Shultz, Marketing News (October 22, 2001), p. 8.

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WHAT IS THE ROLE OF MARKETING IN AN ORGANIZATION?

Total Organization(Culture)

Operational(Tactical)

Division (SBU)(Strategy)

To shape and maintain organization’s cultural beliefs and values about the necessity and importance of providing customers with satisfaction over the long-term

Defining the organization’s strategy for competing within a given market

Managing the daily specifics of the marketing mix and customer-reseller relationships

Each level must provide continuity and be consistent with the others.

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INTEGRATED MARKETING SYSTEM

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BASIC MARKETING QUESTIONS

Are customer-oriented strategies adapted to changes in markets and buying behavior?

Are customers involved earlier in the marketing process, leading to a better understanding of customers?

What are your value-added marketing strategies: quality, service, and value?

How effective are your internal marketing programs for employees?

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-1-INNOVATION

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KEY CONCEPTS

InventionIt is the birth of new ideas; it is an object,

process, or technique which displays an element of novelty (Schumpeter, 1960) ; it is related to science and discovery

InnovationIt is the transformation and bundling of those

ideas into marketable products and services; it is both a process and a result

New product / serviceIt is just the result of the innovation process

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WHAT IS AN INNOVATION ?

An innovation is something new

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CLASSIFICATION OF INNOVATIONS

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HENDERSON & CLARK, 1990

Components conception

Improved Modified

Impact on the links between components (architecture)

Unchanged

Incrémental innovation

ModularInnovation

ModifiedArchitectura

lInnovation

Radical Innovation

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22

CHANDY ET TELLIS (2000)

Market

Existing New

Product

ExistingIncrémentalinnovation

Market breakthrough

NewTechnologybreakthroug

h

Radical innovation

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ROBERTSON (1967)

Continuous Innovation : no impact (change) on consumer behavior

Coca Cola Zero Semi continuous Innovation : a significant impact on

consumer behaviorelectric car, mobile phone

Discontinuous Innovation : a radical modification on consumer behavior

Internet, JAT

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24

CONCLUSION

Two dimensions used : Technology Market

3 types of classifications : Only technology Only market Both

All try to explain degrees of newness

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WHAT IS NEWNESS ?

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NEWNESS

Newness is a collative property What makes us perceive something to be

new ? The heart of newness

Change : as compared with what is known Surprise : disconfirmation of a normal expectation Incongruence : surprise + inconsistency

Feelings related to newness Uncertainty : what does it mean ? Conflict : with stired knowledges Complexity : hard to understand

(Berlyne 1960)

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IMPACT OF NEWNESS

Exploration

Motivation

Affect

Arousal(OSL)

Analogy learning

Progressive process

Curiosity

Catégorization

Affective facetCognitive facet

Something new

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NEWNESS AND CATÉGORIZATION

Catégorization

Assimilation AccomodationRe-

CatégorizationStep by step

process

Expectations

Difference between

target and new object

If impossibl

e

Ifimpossibl

e

If impossibl

e

Extreme

moderate

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IMPACT OF NEWNESS ON AFFECT

Fear

Hedonistic value

Stimulus intensity

OSL

Diversiveexploratio

n

Avoidance

Specificexploratio

n

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NEWNESS AND ATTRACTIVENESS

Degree of newnessIncremental Radical

Try

pro

babi

lity

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INNOVATION - DEFINITION

Characteristics Recency Change (difference, surprise, uncongruence)

Operational definition : Any recent idea service or object that imply a

change in representation, thinking, judgment and/or behavior and which evaluation is

uncertain (risky) As a consequence, incremental innovation is

an oxymoron

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INNOVATION DIFFUSION

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PURCHASE OF AN INNOVATION

Innovation

Individual

Persuasion

Knowledge DecisionImple

mentationConfirmation

Social context

Social context

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INNOVATION PERCEPTION

Relative advantage Compatibility Complexity Visibility Triability Perceived risk

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INNOVATOR (B2C)

Interested into product category Highly innovative, i.e. attracted by newness Tend to be opinion leader Younger, higher revenues, urban Tend to consume a lot in the product

category

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« LEAD USER » (VON HIPPEL)

A user « ahead », High level of expertise Indentifies the lacks of existing solutions Able to adapt (tinker) existing products to his

own needs Very useful to imagine new product ideas Among first buyers

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CATEGORIES OF ADOPTERS

Innovators

Technology Enthusiasts

Early Adopters

Visionaries

Late Majority

Conservatives

Early Majority

Pragmatists

Laggards

Skeptics

{ { { { {

TheChasm

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CONCLUSION

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MAIN WORDS FOR INNOVATION

Change Risk Uncertainty New behaviors …

Exactly what a company hates

-2-Marketing New Product Development Process

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STAGE-GATE MODEL (COOPER, 2001)

NEW PRODUCT DEVELOPMENT PROCESS (URBAN AND HAUSER, 1998)

42New product launching

Opportunity seekingMarket evaluation - Ideas generation

Idea screening

Idea validation Concept generation and testing

Marketing MixProduct testing - Name, price,

advertising, etc. testing -Test market

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IDEA GENERATION

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Strategies for obtaining new-product ideas: Acquisition of companies, patents, licenses New product development, product improvements

and modifications

IDEA GENERATION

Internal sources:• Company employees at all levels (Teian method)• Research and Development

External sources:• Clients/Users (Lead-Users, In-depth interviews,

Ethnographic search)• Competitors (Reverse engineering)• Distributors• Suppliers• Outsourcing• Patents and inventions - www.inpi.fr

45

IDEA SCREENING

Process used to spot good ideas and drop poor ones. Executives provide a

description of the product along with estimates of market size, product price, development time and costs, manufacturing costs, and rate of return.

Evaluated against a set of company criteria for new products.

• Expected cash flows over time• Potential profitability• Returns on: Investment Equity Assets Sales Cost of capital Present value• Opportunity cost

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CONCEPT DEVELOPMENT AND TESTING

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PURPOSE

Profile the intented market Current buying patterns Existing segments Customers view of available products

Assess purchase intention and product positioning Trial and repeat purchase Brand loyalty

Refine and improve the concept Overall Specific features and attributes

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MAIN OBJECTIVES

Purchase intentions How to improve/enhance the basic concept Characteristics of potential buyers First elements of launching strategy

Target Competitve positionning

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May be qualitative or quantitative

Qualitative techniques include:• In-depth interviews of individuals• Focus groups• Projective methods

Quantitative techniques include:• Surveys using structured questionnaires• Personally administered• Administered by mail, phone or Internet questioning • May focus on a single concept (monadic) or• Invite comparisons between two or more concepts.

Research methods used

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METHOD FOR CONCEPT TESTING

Qualitative methods In depth interviews Focus groups Projective methods

Quantitative methods Surveys Face to face questionnaires Small samples

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Source : Mohr, Sengupta, Slater, 2005

MARKETING STRATEGY AND BUSINESS ANALYSIS

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MARKETING STRATEGY DEVELOPMENT

Part One:Describes the target market, planned

product positions, sales, market share, and profit goals.

Part Two:Outlines the product’s planned price,

distribution, and marketing budget. Part Three:

Describes the long-run sales and profit goals, marketing mix strategy.

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BUSINESS ANALYSIS

Involves a review of the sales, costs, and profit projections to assess fit with company objectives.

If results are positive, project moves to the product development phase.

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Source : Mohr, Sengupta, Slater, 2005

PRODUCT DEVELOPMENT

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PRODUCT DEVELOPMENT

Develop concept into physical product. Calls for large jump in investment. Prototypes are made. Prototype must have correct physical

features and convey psychological characteristics.

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Source : Mohr, Sengupta, Slater, 2005

TEST MARKETING AND COMMERCIALISATION

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TEST MARKETING

Product and program introduced in more realistic market setting.

Not needed for all products. Can be expensive and time consuming, but

better than making major marketing mistake.

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COMMERCIALIZATION

Must decide on timing (i.e., when to introduce the product).

Must decide on where to introduce the product (e.g., single location, state, region, nationally, internationally).

Must develop a market rollout plan.

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Source : Mohr, Sengupta, Slater, 2005

CONCLUSION

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NEW-PRODUCT FAILURES

Only 10% of new consumer products are still on the market and profitable after 3 years.

Industrial products failure rate as high as 30%.

Why do products fail?Overestimation of market sizeDesign problems Incorrectly positioned, priced, or advertisedPushed despite poor marketing research

findingsDevelopment costsCompetition

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WHAT ABOUT THIS PROCESS

A response to needs process Mainly transactional Mainly relates on customers evaluation of the

innovation