Question No. 7 - Principles of Marketing BCOE - 141

Solutions to Assignments 

BCOE - 141 - Principles of Marketing

Question No. 7 

 Explain the process of new product development. 

The process of new product development involves 8 steps as described below: 

1. Idea generation – The New Product Development Process

The new product development process starts with idea generation. Idea generation refers to the systematic search for new-product ideas. Typically, a company generates hundreds of ideas, maybe even thousands, to find a handful of good ones in the end. Two sources of new ideas can be identified:

a. Internal idea sources: the company finds new ideas internally. That means R&D, but also contributions from employees.

b. External idea sources: the company finds new ideas externally. This refers to all kinds of external sources, e.g. distributors and suppliers, but also competitors. The most important external source are customers, because the new product development process should focus on creating customer value.

2. Idea screening – The New Product Development Process

The next step in the new product development process is idea screening. Idea screening means nothing else than filtering the ideas to pick out good ones. In other words, all ideas generated are screened to spot good ones and drop poor ones as soon as possible. While the purpose of idea generation was to create a large number of ideas, the purpose of the succeeding stages is to reduce that number. The reason is that product development costs rise greatly in later stages. Therefore, the company would like to go ahead only with those product ideas that will turn into profitable products. Dropping the poor ideas as soon as possible is, consequently, of crucial importance.

3. Concept development and Testing – The New Product Development Process

To go on in the new product development process, attractive ideas must be developed into a product concept. A product concept is a detailed version of the new-product idea stated in meaningful consumer terms. You should distinguish

A product idea -  an idea for a possible product

A product concept - a detailed version of the idea stated in meaningful consumer terms

A product image - the way consumers perceive an actual or potential product.

4. Marketing strategy development – The New Product Development Process

The next step in the new product development process is the marketing strategy development. When a promising concept has been developed and tested, it is time to design an initial marketing strategy for the new product based on the product concept for introducing this new product to the market. The marketing strategy statement consists of three parts and should be formulated carefully:

• A description of the target market, the planned value proposition, and the sales, market share and profit goals for the first few years 

• An outline of the product’s planned price, distribution and marketing budget for the first year 

• The planned long-term sales, profit goals and the marketing mix strategy.

5. Business analysis – The New Product Development Process

Once decided upon a product concept and marketing strategy, management can evaluate the business attractiveness of the proposed new product. The fifth step in the new product development process involves a review of the sales, costs and profit projections for the new product to find out whether these factors satisfy the company’s objectives. If they do, the product can be moved on to the product development stage. In order to estimate sales, the company could look at the sales history of similar products and conduct market surveys. Then, it should be able to estimate minimum and maximum sales to assess the range of risk. When the sales forecast is prepared, the firm can estimate the expected costs and profits for a product, including marketing, R&D, operations etc. All the sales and costs figures together can eventually be used to analyse the new product’s financial attractiveness.

6. Product development – The New Product Development Process

The new product development process goes on with the actual product development. Up to this point, for many new product concepts, there may exist only a word description, a drawing or perhaps a rough prototype. But if the product concept passes the business test, it must be developed into a physical product to ensure that the product idea can be turned into a workable market offering. The problem is, though, that at this stage, R&D and engineering costs cause a huge jump in investment.

The R&D department will develop and test one or more physical versions of the product concept. Developing a successful prototype, however, can take days, weeks, months or even years, depending on the product and prototype methods.

Also, products often undergo tests to make sure they perform safely and effectively. This can be done by the firm itself or outsourced.

In many cases, marketers involve actual customers in product testing. Consumers can evaluate prototypes and work with pre-release products. Their experiences may be very useful in the product development stage.

7. Test marketing – The New Product Development Process

The last stage before commercialisation in the new product development process is test marketing. In this stage of the new product development process, the product and its proposed marketing programme are tested in realistic market settings. Therefore, test marketing gives the marketer experience with marketing the product before going to the great expense of full introduction. In fact, it allows the company to test the product and its entire marketing programme, including targeting and positioning strategy, advertising, distributions, packaging etc. before the full investment is made.

8. Commercialisation

Test marketing has given management the information needed to make the final decision: launch or do not launch the new product. The final stage in the new product development process is commercialisation. Commercialisation means nothing else than introducing a new product into the market. At this point, the highest costs are incurred: the company may need to build or rent a manufacturing facility. Large amounts may be spent on advertising, sales promotion and other marketing efforts in the first year.

Question No. 6 - Principles of Marketing BCOE - 141

Solutions to Assignments 

BCOE - 141 - Principles of Marketing

Question No.  6

What do you mean by market segmentation? Explain the basis of market segmentation.

Market segmentation is a marketing concept which divides the complete market set up into smaller subsets comprising of consumers with a similar taste, demand and preference. A market segment is a small unit within a large market comprising of like minded individuals. One market segment is totally distinct from the other segment. A market segment comprises of individuals who think on the same lines and have similar interests. The individuals from the same segment respond in a similar way to the fluctuations in the market.

• Basis of Market Segmentation

1. Gender

The marketers divide the market into smaller segments based on gender. Both men and women have different interests and preferences, and thus the need for segmentation. Organisations need to have different marketing strategies for men which would obviously not work in case of females. A woman would not purchase a product meant for males and vice a versa. The segmentation of the market as per the gender is important in many industries like cosmetics, footwear, jewellery and apparel industries.

2. Age Group

Division on the basis of age group of the target audience is also one of the ways of market segmentation. The products and marketing strategies for teenagers would obviously be different than kids.

Age group (0 - 10 years) - Toys, Nappies, Baby Food, Prams

Age Group (10 - 20 years) - Toys, Apparels, Books, School Bags

Age group (20 years and above) - Cosmetics, Anti-Ageing Products, Magazines, apparels and so on

 

3. Income

Marketers divide the consumers into small segments as per their income. Individuals are classified into segments according to their monthly earnings.

The three categories are:

a. High income Group 

b. Mid Income Group

c. Low Income Group

Stores catering to the higher income group would have different range of products and strategies as compared to stores which target the lower income group. Pantaloon, Carrefour, Shopper’s stop target the high income group as compared to Vishal Retail, Reliance Retail or Big bazaar who cater to the individuals belonging to the lower income segment.

4. Marital Status

Market segmentation can also be as per the marital status of the individuals. Travel agencies would not have similar holiday packages for bachelors and married couples.

5. Occupation 

Office goers would have different needs as compared to school / college students. A beach house shirt or a funky T Shirt would have no takers in a Zodiac Store as it caters specifically to the professionals.

6. Usage

Product usage also acts as a segmenting basis. A user can be labelled as heavy, medium or light user of a product. The audience can also be segmented on the basis of their awareness of the product.

7. Lifestyle

Other than physical factors, marketers also segment the market on the basis of lifestyle. Lifestyle includes subsets like marital status, interests, hobbies, religion, values, and other psychographic factors which affect the decision making of an individual.

Question No. 5 - Accounting for Managerial Decisions

Solutions to Assignments 

MCO-05 Accounting for Managerial Decisions

Question No. 5

The Solution for the given problem can be made using the concepts given in the chapter Cash Flow Statement in accordance with AS 3 (Revised). 

The solution is as follows:-

Question No. 3 - Accounting for Managerial Decisions

Solutions to Assignments 

MCO-05 Accounting for Managerial Decisions

Question 3

Solution

The solution for the given problem can be solved using the concepts of marginal costing, wherein the basic principles for calculating break even point and margin of safety are given. 

The solution for the given problem is as follows:-

Question No. 5 - Principles of Marketing BCOE - 141

Solutions to Assignments 

BCOE - 141 - Principles of Marketing

Question No. 5

What do you mean by advertising? Explain the various media of advertising and compare their advantages and limitations.

Advertising is a means of communication with the users of a product or service. Advertisements are messages paid for by those who send them and are intended to inform or influence people who receive them, as defined by the Advertising Association of the UK.

Advertising is always present, though people may not be aware of it. In today's world, advertising uses every possible media to get its message through. It does this via television, print (newspapers, magazines, journals etc), radio, press, internet, direct selling, hoardings, mailers, contests, sponsorships, posters, clothes, events, colours, sounds, visuals and even people (endorsements).

• Different Types of Media

A. PRINT MEDIA

Here are the different types of print media along with the corresponding advantages and disadvantages of using them to communicate with customers:

1. Newspapers

News and other organisations create national, regional (local) or special interest newspapers and often distribute them daily. They disseminate an extensive amount of information at a low price to readers. Newspapers can include several ad types, such as classified ads, display ads and inserts.

• Advantages of newspapers

1. Large volume of readers: According to surveys conducted by the Pew Research Centre, the data from 2018 indicates that 16% of adults got their news from a daily newspaper.
2. High frequency: Most national and local newspaper organisations deliver daily.
3. Inexpensive: Newspapers are usually $3 or less, and you can receive a discount if you pay for a yearly subscription.
4. High level of reader engagement: Readers must decide to purchase a newspaper and when they read it, increasing their level of engagement with the content.
5. Geographic specificity: Ads can target a local or national audience.

• Disadvantages of newspapers

1. Possibility of becoming ruined: Printers use inexpensive, low-quality paper that becomes discoloured and brittle.
2. Inability to target specific demographics or lifestyles: Newspaper readers are a diverse population. Ads in newspapers cannot target specific genders, ages, hobbies or economic class.
3. Short period of relevance: Most newspapers contain daily events and news that lose relevance within a day or two.
4. Audience must be able to read: Newspapers are only available for those who can read and those who have access to shops or delivery.

2. Magazines

Magazines can be consumer-related or business-related. Consumer magazines include those focused on glamour, lifestyles, entertainment and special interests. Consumer magazines are often printed monthly. Business magazines share news, information, reviews and research related to a specific industry and can include trade journals and professional publications. Business magazines are typically printed on a monthly or quarterly basis.

• Advantages of magazines

1. Higher quality physical product: Magazine printers use glossy, higher quality paper than newsprint.
2. Targeted lifestyles and demographics: Because magazine readership is segmented by gender, interest or industry, advertisers can choose the most relevant publications.
3. Long period of relevance and usefulness: Magazines contain information and articles that can be useful for months or years, such as recipes, research and informational pieces.
4. High level of reader engagement: Readers are engaged in reading magazine articles, rather than being passive observers.

• Disadvantages of magazines

1. Low frequency: Magazine subscriptions often reach readers monthly. Other readers may purchase magazines inconsistently.
2. Expensive: Advertising in magazines can be more expensive than advertising in newspapers.
3. Competition: Many magazines have similar audiences, which leads to increased competition for reader attention and ad space.

3. Direct mail

Direct mail includes informational flyers or postcard promotions delivered via USPS to the home or business address of a specified list of customers.

• Advantages of direct mail

1. Highly specific audiences: Companies can pay for mailing lists filtered by zip code, income level, family size and more to reach individuals and families most likely to purchase products or services.
2. Convenient and free for consumers: Customers do not have to make any extra effort to see your content.
3. Opportunity for creativity: Direct mail provides an opportunity for advertisers to invoke creativity to gain readers' attention.
4. Personalisation: Advertisers can personalize mail with recipients' names.

• Disadvantages of direct mail

1. High cost of creation and demographic research: Direct mail can incur high costs if advertisers purchase extensive lists, send a large quantity or use nontraditional sizes or shapes.
2. Time requirement: Direct mail requires advanced planning for creation, printing, mailing and delivery.
3. Low response rate: Most direct mail recipients do not respond to mailers.

B. BROADCAST MEDIA

Here are the different types of broadcast media along with the corresponding advantages and disadvantages:

1. Television

Television provides audiences with audio and visual stimuli to deliver information and entertainment.

• Advantages of television

1. High viewership rates: Millions of viewers watch popular television shows or live events, like sports.
2. Ads appear automatically: Viewers see ads without making any extra effort.
3. Highly targeted to key demographics: Advertisers can use market research for time blocks, channel and type of program to target their desired audience.
4. Flexibility: Television advertising allows for creative, emotional or shocking methods for gaining viewer attention.

• Disadvantages of television

1. High cost: Television ads, especially those during popular shows and events, are expensive.
2. Channel changing or fast-forwarding: Viewers have the option to skip your ad.
3. Limited viewer attention: Viewers may experience distractions that prevent them from paying attention to your ad.
4. Short ad lifespan: Television ads are typically 15, 30 or 60 seconds long.

2. Radio

Radio offers listeners audio programming, including music, news and podcasts.

• Advantages of radio

1. Low cost: Radio advertisements are typically cheaper than television ads.
2. Flexibility: Advertisers can target listeners based on time, geographic location, channel and program.
3. Vast coverage: Radio programming has millions of listeners nationwide.
4. Ability to reach low-income audiences: Many populations that may not have access to other mediums usually have radio access.

• Disadvantages of radio

1. Channel changing or fast-forwarding: Listeners may not pay attention to your ad.
2. Short ad lifespan: Radio ads are typically 15, 30 or 60 seconds long.
3. Less retention due to multiple ads airing consecutively: Radio ads appear in blocks, which could detract from listener retention.
4. No visual elements: Relying only on audio content may diminish listener retention and response.

3. Movies

Movies provide opportunities for advertisers to incorporate their products outside of a traditional advertisement. The characters may mention or use a specific product due to an advertising deal between the movie studio and the company selling the product. For instance, many movies incorporate product placement of certain car or truck brands. Additionally, movie theaters often run ads just before showing a film.

• Advantages of movie advertising

1. Vast reach: Movie attendance, on average, includes over 1 billion viewers annually.
2. Engaged audience: Moviegoers expect to pay attention.
3. Capitalising on the experience: Going to the movies provides a unique collective, emotional experience that advertisers can take advantage of.
4. Limited distractions: Generally, movie theaters are free of loud noise, visual distractions and background interruptions.
5. Targeted geographic and age demographics: Advertisers can use market research to target audiences of certain movies of gender, age and interests.

• Disadvantages of movie advertising

1. Low recall of ads or products: When products are placed in movies—or ads during the pre-show—they may be harder to remember.
2. High cost: Movie cinema ads are expensive compared to print media ads.
3. Low frequency: Audiences may not see movies as frequently at a cinema due to increased costs and competition from streaming services.

C. INTERNET MEDIA

Internet media refers to audio and visual content transmitted online. It can include words, images, graphics and interactive elements. Here are some different types of internet media along with the corresponding advantages and disadvantages:

1. Email

Companies use email messages to reach customers quickly and directly.

• Advantages of email

1. Inexpensive: Sending and receiving a basic email is free.
2. Easy to create: You can write an email to customers with a few simple lines. Several email marketing programs provide email templates and free images.
3. Less research: Often, you won't need to do extensive research for customer email addresses as customers provide them frequently at points of sale.

• Disadvantages of email

1. Low click-through rates: While many people may open your email, far fewer will click links to visit your site.
2. Competition: Many companies use email marketing campaigns. Additionally, some email servers are identifying and filtering marketing emails.
3. May feel intrusive to consumers: Customers may not remember providing their email address to you or accepting an agreement to receive emails. Be sure your email includes a link to unsubscribe from future emails.

2. Social media

Social media is a crucial component of many companies' marketing plans because of its popularity and longevity.

• Advantages of social media

1. Large audience: Billions of people use social media worldwide.
2. Highly targeted ads: Companies can use the large amounts of data collected on users, like habits, purchase history and friends.
3. Can be inexpensive: Using social media organically to post and interact with customers can be free or very inexpensive.
4. Interactive: Social media posts can have interactive capabilities for viewers, increasing engagement.
5. Direct connection to consumers: Companies can use social media to speak directly to consumers in real time.
6. Large amount of performance evaluation data available: Advertisers can use a number of programs to monitor, track and report on social media ad performance.

• Disadvantages of social media

1. Competition: Other companies seeking to reach your same audience may compete for the same ad space.
2. User research can become expensive: The more in-depth your research, the more expensive it will be.
3. Can feel intrusive to consumers: Customers may feel a lack of privacy when viewing highly targeted ads.
4. Potential for negative comments: Open comments sections may include negative posts.
5. Time-consuming: Building a brand and using social media effectively requires frequency, consistency and a high level of responsiveness to gain followers.

D. OUT OF HOME MEDIA

Out-of-home (OOH) media reaches consumers where they spend their time outside, including city streets, highways and transit stations. The following are types of OOH media along with the corresponding advantages and disadvantages:

1. Billboards and outdoor signs

Billboards and outdoor signs may appear along busy streets, recreation centers, city sidewalks and retail centers.

• Advantages of billboards and outdoor signs

1. Wide reach: In high-density areas, hundreds or thousands of people may see your ads.
2. Inexpensive: Billboards and posters are cheaper than many other forms of advertising.
3. Frequency: People who travel the same route or frequent the same locations see your ads regularly.
4. Impactful messaging: Advertisers can use the small amount of space on a billboard or sign to create powerful statements that attract attention.

• Disadvantages of billboards and outdoor signs

1. Limited audience targeting: The audience for outdoor advertising is often less targeted, as advertisers cannot filter for demographics.
2. Low response rate: While billboards and posters can remind consumers of your brand, they may rarely lead to action.
3. Audience desensitisation: If consumers see your ads daily for months, they may become desensitised to the message.

2. Transit station ads

You can find OOH media in bus stations, subway stations, train stations and airports where there is always a lot of foot traffic. The advantages and disadvantages of these types of ads are similar to billboards and outdoor signs.

• Advantages of transit station ads

1. Wide reach
2. Inexpensive
3. Impactful messaging

• Disadvantages of transit station ads

1. Limited audience targeting
2. Low response rate
3. Performance difficult to measure