Marketing Management

Sixteenth Edition

Chapter 18
Developing New Market
Offerings

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Learning Objectives
18.1 Explain how companies develop new offerings.
18.2 Explain how companies generate new ideas.
18.3 Describe how companies create and validate a
prototype.
18.4 Summarize the key aspects of designing a business
model for a new offering.
18.5 Explain how companies implement new offering
strategies.
18.6 Discuss the key steps in commercially deploying a
new offering.
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The Process of Developing New Market
Offerings (1 of 2)
• The innovation imperative
– Continuous innovation is
a necessity
– Incremental innovation
vs. new to the world
innovation

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The Process of Developing New Market
Offerings (2 of 2)
• Managing innovation
– Assign responsibility to departments in charge of
current offerings
– Establish new product departments
– Open innovation centers
– Establish venture teams
▪ Intrapreneurs
– Create forums for sharing ideas
– Create cross-functional teams combining different
skillsets

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The Stage Gate Approach to Developing
New Offerings (1 of 2)
• Stage gate framework
– Idea generation
– Concept development
– Business-model
design
– Offering development
– Commercial
deployment

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Figure 18.1 The Stage Gate Framework
for Developing New Offerings

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The Stage Gate Approach to Developing
New Offerings (2 of 2)
• The stage gate framework has three goals:
– Develop a desirable offering that target customers will
find attractive
– Develop a technologically feasible offering that the
company will find doable
– Develop a viable offering that will create value for the
company and its collaborator

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An Illustration of the Stage Gate
Approach
• Idea generation and validation
• Concept development and validation
• Business model design and validation
• Offering implementation and market testing
• Commercial deployment

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Generating Viable Ideas
• Top-down idea generation
– Begins with identifying a market opportunity followed
by developing an offering specifically designed to
address this opportunity
• Bottom-up idea generation
– Starts with an invention and then seeks to identify an
unmet market need

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Idea Validation
• Assess desirability and viability
• Two potential errors:
– Failure to reject an idea that has little or no merit
– Rejection of a good idea

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Figure 18.2 Why Good Ideas Fail: Forces
Fighting New Ideas

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Research Tools
• Observing customers
• Interviewing customers
• Interviewing employees and experts
• Analyzing the competition
• Crowdsourcing

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Concept Development
• Prototype
– A working model of the offering that aims to flesh out
the original idea and weed out potential problems
before the actual offering is created

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Prototyping
• Alpha testing
– Evaluation of the product within the firm
• Beta testing
– Tests the product with customers

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Concept Validation
• Two key questions:
– Can a functional prototype and, later, a fully functional
version of the offering be built?
– Does it fulfill the identified customer need better than
the alternative options?

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Business Model Design
• Can the product idea be translated into a commercial
one?
– Viability
– Feasibility
– Desirability

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Designing the Business Model
• Three components:
– Identifying the target market
– Articulating the offering’s value proposition
– Delineating the key attributes of the product offering

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Figure 18.3 The Key Components of a
Business Model of a New Offering

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Business Model Validation
• Do target customers find the offering desirable, and does
it create value for these customers?
• Is it feasible for the offering to be built as planned?
• Is the offering viable—that is, able to create value for the
company and its collaborators?

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Offering Implementation (1 of 2)
• Developing the core resources
– Business facilities
– Supply channels
– Distribution channels
– Skilled employees
– Access to capital

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Offering Implementation (2 of 2)
• Developing the market offering
– Making the prototype market-ready
▪ Create the final product or service
▪ Develop the brand
▪ Set prices
▪ Determine sales promotions
▪ Effectively communicate offering benefits

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Commercial Deployment
• Commercialization
– Informs target customers about the company’s
offering and makes the offering available to these
customers

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Selective Market Deployment
• Allows company to conduct testing in a natural
environment and observe how target customers,
competitors, and company collaborators react to the
offering

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Market Expansion
• Three key activities:
– Ramping up the facilities involved in the offering’s
production
– Promoting the offering to all target customers
– Ensuring that the offering is available to the entire
target market

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Figure 18.4 Adopter Categorization on the Basis
of Relative Time of Adoption of Innovations

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Discussion Questions (1 of 2)
• Meatless products like BeyondMeat and Impossible were
introduced just a few years ago. Today, they can be found
everywhere from supermarkets to Starbucks to Burger
King.
– Why have meatless products like BeyondMeat and
Impossible gained wide-spread acceptance so
quickly?
– How would you characterize these products? Are they
the result of incremental innovation or new to the
world innovation?

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Discussion Questions (2 of 2)
• Many beer companies now sell hard seltzer products in
addition to beer. Discuss these new product offerings.
– What motivated their development?
– Do they represent top-down idea generation or
bottom-up idea generation?
– Why have these products been successful?

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