ch8 new product and the net
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new product and the netTRANSCRIPT
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Internet Marketing
New Product Development
andthe Net
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Marketing ProcessesThat Can Be Digitized
Understand Markets
& Customer
s
Involve Customer
s in Design Process
Market & Sell
Products &
Services
Deliver Value
Through Distributi
onProvide
Customer Care
Manage Customer Informati
on
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Topics
• High-tech battles• Speed• Flexible new products• Standards
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High-Tech BattlesThe Browser Wars
The browser battles started with a strong showing from Netscape. From a startup in 1995, Netscape became a billion-dollar company, the fastest-growing software
company ever.
Four generations of browser technology took Microsoft… from sideline player to
browser lead. The battles also led to controversy, anti-Microsoft newspaper editorials, and governmental antitrust
attention.
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The Need for Speed• Internet time refers to rapid change and evolution
of– Internet tools– The marketplace– Business practices
• An entire industry created in < 5 years• Internet time also refers to acceleration of
– New product development– Competitive activity– Business tactics
• Using the Net’s communication & research capabilities to bring new products to market quickly is essential
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Speed and Profits
• High profits from a successful early market entry can be plowed back into next generation products
• Slow entry and lost profits lead to erosion of a company’s fortunes
Figure 8.3
Profits and Speed to Market
3x
2x
1xX
06 months early 6 months late
Time of Market I ntroduction Relative to Competitors
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Speed and Innovativeness• Slowness to market erodes consumers’
positive perceptions of a company• Best-in-class companies use time pacing
to govern new product activity• Rapid product introduction is critical in
high-tech markets– Market leaders can count on high consumer
interest, feedback and free advice– Speed to market leads to learning
• Companies that use customer feedback have an important advantage over rivals
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Speed and Alliances• Early market entrants attract leading-
edge partners– Third-party suppliers approach market
leaders with enhancements and improvements
– Allies fill in product and marketing gaps to provide a complete solution for customers
• For the market leader, money and talent are too scarce to “go it alone”
• Distribution partnerships are key to getting product to market
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Speed and Standards• Market leaders often play a key role in
setting standards• Companies that define standards can be
in a strong strategic position for decades• Rivalries between competing standards
don’t usually last long– Once a standard is established, the
marketplace swings dramatically toward it– The losing standard sinks quickly– VHS vs. Beta Max
• When standards matter, success breeds success
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Traditional New Product Development
• Too slow for Internet time
• Two main goals– Uncover unmet customer
needs– Eliminate design
mistakes before too many resources are committed
• Many new ideas enter the new product process
• Only a few new products emerge
• This process is expensive and time consuming
Figure 8.5
General Product Design Funnel
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Rapid New Product Development
• Internet time forces firms to find new ways to identify user needs and rapidly launch new products
• The keys– Maintain flexibility as long as possible– Accelerate the process of market feedback
• These methods work especially well for online products
• But they are spreading to the rest of the economy
Figure 8.6 Sensing the Market
Specifi cation
Design
Testing
I ntegration
Stabilization/ Ramp-Up
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Modularity in Design• Modular design breaks a new product
into subsystems or modules– Each module can be designed and tested
separately– Teams can work in parallel, rather than wait
for a preceding group to finish its work
• Parallel efforts reduce dramatically the total time to launch new products
• Enables firms to handle speed and complexity in new product development
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Modularity in Design• Modularity requires two design features
– Visible design rules– Hidden design parameters
• Visible design rules: define the ways that modules interact with each other and describe how they should fit together
• Hidden design parameters: define how each module works internally– Each team has full control over the hidden
design parameters of its module– Enables the team to delay final design choices
as long as possible, to reflect marketplace feedback and to accommodate changing technologies
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Early Feedback• Flexible new product development relies
on the ability to get meaningful and rapid feedback from customers– Identify new opportunities– React to new designs– Spot declining interest in existing products
• E-mail enables low-cost, rapid access to customers– Can speed up feedback from lead users– Faster and cheaper method of conducting
surveys
• Using the Net to release early prototypes also permits valuable learning and testing
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Rapid Prototyping and Testing
• Alpha release: limited release to trusted lead users and company employees– May be asked to sign NDA– The goal is to shape the product and
understand how functional it is– The competitive clock starts ticking with the
alpha release
• Beta release: public release to widely test and to continue to refine the feature set– Key goals are reliability, compatibility, and
fixing user interface problems– Beta-testing is a form of advertising and
sampling– A valuable substitute for extensive testing
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Rapid Release• Rapid product development sets
the stage for profitability• The ability to go to market quickly
is a final key to success• Time lost in the distribution cycle
is even more damaging than time lost in development
• Once the product design is frozen and has been released to manufacturing, all time lost is pure cost
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Standards Marketing
• Standards are a defining feature of high-tech markets
• Standards determine– How hard drives, floppy disks, screens,
keyboards, and memory communicate with each other
– How computers connect to the Internet– How files and messages are turned into packets– How packets reach their destination
• Conventions are also important– General practices that designers expect – Not formally set by a standards body
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Two Types of Standards
• Open standard: based on an official process of debate, consensus, and voting by an official standards body
• De facto standard: established when a product or approach is so widely adopted that it becomes expected
• De facto standards are controlled by a single company – open standards are not– Sun Microsystem’s has submitted Java to the
ISO for acceptance as an open standard– Microsoft’s Active X: a proprietary standard
owned and controlled by Microsoft
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Creation of an Open Internet Standard
Figure 8.9 Write
Specifi cation
Plausible?
Clear?
Proposed Standard
At least two independent
working versions?
Draf t Standard
Technically mature
consensus exists?
I nternet Standard
Rewrite
Wait f or working
code
Wait f or
resolution
NO
YES
YES
NO
NO
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Standards Strategy
• High-tech companies often have formal staff positions that set standards strategy– Participate in the standards bodies– Project which standards seem to be winning
• Managers need to decide which standards to deploy in their products– Should base their products on open standards?– Or should they try to win a battle in the
marketplace with a proprietary standard?
• In high-tech markets, a single standard generally emerges and the winner takes all
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Standards Competition Leading to Domination
Figure 8.12
Unstable
sharing of
market
Market share of standard A in time t
0% 50%
100%
50%
100%
0%
A loses
A wins
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Information Acceleration Systems
• Place consumers in a virtual buying environment
• IA systems simulate the information that’s available to consumers when they make a purchase decision– Virtual showroom visits– Advertising (TV, magazines, newspapers)– Review articles and consumer-oriented reports– Word of mouth
• Are these virtual environments realistic enough to accurately measure behavior?– Early evidence is positive, but mixed
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Solving Problems Online
• Lower customer support costs
• Improved online value for customers
• Companies and consumers benefit– Lower costs improve
profit margins– Savings can be
passed through to consumers Figure 6.3
Provides Strong Justification for Investing in the Web
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Cost Savings
Q: Where do these cost savings come from?
• Online publishing saves the cost of printing and shipping manuals
• Software updates can be downloaded, saving the cost of burning and shipping CDs
• Virtual problem solving• Inexpensive communication
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Traditional Customer Service Methods Are
Expensive
• Sales calls and call centers – Require expensive, assisted, real-time
interactions– Are labor intensive
Customer ServiceMethod
Agent:CustomerRatio
Type ofInteraction
Type ofService
Sales Force 1:1 Real- time Assisted
Call Center 1:1 Real- time Assisted
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Headline
Insert excerpts from a current article out of the business press (e.g. Wall Street
Journal, Wired News, Business 2.0, or Fast Company) that talks about the importance of online customer support. I usually take excerpts out of the lead paragraph, and highlight keywords. There have been a
number of articles talking about increased investments in online customer support.
Name of Publication - Date
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The ADR FrameworkAcquisitionSupported
DevelopmentSupported
RetentionSupported
Web Advertising E- mail accounts Free trials Amazon partners Edmund's QFN
Community andpersonalizationspending
I nformationcollection
Syndication expenses
Customer support Enhancement
spending Eff ectiveness
spending
• Acquisition: the cost of bringing in new customers• Development: costs incurred expanding the share-
of-customer that firms receive from existing customers
• Retention: costs to keep the business and loyalty of current customers