Marketing and innovation – A Classical view

1. 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 2

3. Marketing as exchange Objects of the exchange Customer Supplier Exchange context 3

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 4

5. Marketing Management path Discover the need Conceive a product to fulfill the need Test this product and improve it Sell the product 5

6. Marketing Management paradigm Segmentation – Targeting – Positioning Marketing Mix – Four P’s Planning process 6

7. Limits of the paradigm Mainlydependant on products Mainlyconcernedwith standard products Mainlyrelated to consumer markets 7

8. 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 8

9. 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 » 9

10. From transaction to relation 10 Marketing Management B2B Marketing Service Marketing Transaction focused Importance of the relation Relationship Marketing

11. Marketing evolution Sell the product Before Marketing Consumer Marketing Service and B2B Marketing High Technology Marketing Match the need Create a relation Create new needs 11

12. Conclusion

13. 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. 13

14. What Is the Role of Marketing in an Organization? Total Organization (Culture) To shape and maintain organization’s cultural beliefs and values about the necessity and importance of providing customers with satisfaction over the long-term Division (SBU) (Strategy) Defining the organization’s strategy for competing within a given market Operational (Tactical) Managing the daily specifics of the marketing mix and customer-reseller relationships Each level must provide continuity and be consistent with the others. 14

15. Integrated Marketing system 15

16. 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? 16

17. -1-Innovation 17

18. Key Concepts Invention It is the birth of new ideas; itisan object, process, or technique which displays an element of novelty (Schumpeter, 1960) ; itisrelated to science and discovery Innovation It is the transformation and bundling of thoseideasintomarketableproducts and services; itisboth a process and a result New product / service It isjust the result of the innovation process 18

19. What is an innovation ? An innovation is something new 19

20. Classification of innovations 20

21. Henderson & Clark, 1990 21 21

22. Chandy et Tellis (2000) 22 22

23. Robertson (1967) Continuous Innovation : no impact (change) on consumer behavior Coca Cola Zero Semi continuous Innovation : a significant impact on consumer behavior electric car, mobile phone Discontinuous Innovation : a radical modification on consumer behavior Internet, JAT 23

24. Conclusion Two dimensions used : Technology Market 3 types of classifications : Onlytechnology Onlymarket Both All try to explaindegrees of newness 24

25. What is newness ? 25

26. Newness Newnessis a collative property Whatmakes us perceivesomething to be new ? The heart of newness Change : as comparedwithwhatisknown Surprise : disconfirmation of a normal expectation Incongruence : surprise + inconsistency Feelings related to newness Uncertainty : whatdoesitmean ? Conflict : withstiredknowledges Complexity : hard to understand (Berlyne 1960) 26

27. Impact of newness Exploration Motivation Affect Arousal(OSL) Progressive process Curiosity Catégorization Analogylearning Cognitive facet Affective facet Something new 27

28. Newness and catégorization Catégorization Differencebetweentarget and new object Extreme moderate Assimilation Accomodation Re-Catégorization Step by stepprocess If impossible If impossible If impossible Expectations 28

29. Impact of newness on affect Hedonistic value Specific exploration Diversive exploration Fear Stimulus intensity OSL Avoidance 29

30. Newness and attractiveness Tryprobability Incremental Radical Degree of newness 30

31. 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 31

32. Innovation diffusion 32

33. Purchase of an innovation 33 Social context Individual Persu asion Knowledge Decision Imple mentation Confir mation Innovation Social context

34. 34 Innovation perception Relative advantage Compatibility Complexity Visibility Triability Perceivedrisk

35. Innovator (B2C) Interestedintoproductcategory Highlyinnovative, i.e. attracted by newness Tend to be opinion leader Younger, higher revenues, urban Tend to consume a lot in the productcategory 35

36. « Lead user » (Von Hippel) A user « ahead », High level of expertise Indentifies the lacks of existing solutions Able to adapt (tinker) existingproducts to hisownneeds Veryuseful to imagine new productideas Among first buyers 36

37. 37 Categories of Adopters The Chasm

38. CONCLUSION 38

39. Main words for innovation Change Risk Uncertainty New behaviors … 39 Exactly what a company hates

40. -2- Marketing New Product Development Process

41. Stage-Gatemodel (Cooper, 2001) 41

42. New Product developmentProcess (Urban and Hauser, 1998) 42 Opportunityseeking Marketevaluation - Ideasgeneration Idea screening Idea validation Concept generation and testing Marketing Mix Product testing - Name, price, advertising, etc. testing -Test market New productlaunching

43. Idea generation 43

45. Company employees at all levels (Teian method)

46. Research and Development

47. External sources:

48. Clients/Users (Lead-Users, In-depth interviews, Ethnographic search)

49. Competitors (Reverse engineering)

50. Distributors

51. Suppliers

52. Outsourcing

53. Patents and inventions - www.inpi.fr44

55. Potential profitability

57. Concept development and testing 46

58. 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 47

59. Main objectives Purchase intentions How to improve/enhance the basic concept Characteristics of potential buyers First elements of launching strategy Target Competitvepositionning 48

61. Focus groups

63. Personally administered

64. Administered by mail, phone or Internet questioning

65. May focus on a single concept (monadic) or

66. Invite comparisons between two or more concepts.49

67. Method for concept testing Qualitative methods In depth interviews Focus groups Projective methods Quantitative methods Surveys Face to face questionnaires Small samples 50

68. Source : Mohr, Sengupta, Slater, 2005 Marketing strategy and business analysis 51

69. 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. 52

70. 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. 53

71. Source : Mohr, Sengupta, Slater, 2005 Product development 54

72. 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. 55

73. Source : Mohr, Sengupta, Slater, 2005 Test marketing and commercialisation 56

74. 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. 57

75. 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. 58

76. Source : Mohr, Sengupta, Slater, 2005 Conclusion 59

77. 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 size Design problems Incorrectly positioned, priced, or advertised Pushed despite poor marketing research findings Development costs Competition 60

78. What about this process A response to needs process Mainly transactional Mainly relates on customers evaluation of the innovation 61