Marketing: Design, Development, and Marketing Teams

Unit 7 : Track 1: Video Case
- Project: New Balance

Jill Stidd

MT 219


In this project we are to evaluate New Balance Shoe Company and various aspects of New Balance’s design, development, and marketing teams and how they consider costs and pricing as an integral part of the marketing strategy. The role of the price of an item is held in high regards to the marketing manager. The purpose of marketing is to facilitate satisfying exchange relationships between buyer and seller. As our text says, “Price is the value exchanged for products in a marketing transaction. Many factors may influence the assessment of value, including time constraints, price levels, perceived quality and motivations to use available information about prices.” http://kucourses.com/ec/courses/24794/CRS-MT2190703a-3000308/ReadingPDFs/kaplan_marketing_unit07.pdf , p.191

In doing some online research about elastic and inelastic demands I found this great explanation that seemed to bring this concept together. “Every marketing person has heard and talked about "demand" however, few really understand it, even, after taking a basic course in economics. Knowing the basis of demand is very important in developing a marketing plan for the firm's products or services. The definition of demand is the amount of goods/services purchased at a "given time;" therefore, the next day the demand will be different. We all know that as price increases, less will be consumed or, conversely, the lower the price, the greater will be the demand. These relationships can be illustrated using demand curves. The most common are elastic demand, where a greater quantity is consumed as the price is decreased (Fig. l(a)), and inelastic demand where a large change in price will only slightly change quantity consumed (Fig. l(b)). Actual prices and quantities are generally not charted but the concepts are very important.
Figure 1(a): Elastic demand
Figure 1(b): Inelastic demand
Just by their nature, some products, such as food, are essential. These products have an inelastic demand curve. For example, the volume of food consumed may not increase, but the quality of food consumed can increase. Other products have an elastic demand curve. These products are generally nonessential. For instance, services have a highly elastic demand curve, with a small change in price having a greater effect on quantity consumed. Some food-producing firms know people cannot consume greater volumes but will purchase convenience and service; therefore, they promote convenience and service such as prepared foods. These firms are really emphasizing and selling services, which consumers can purchase and use in greater quantities. Generally, one advertises elastic products, not inelastic products.” http://www.missouribusiness.net/docs/market_research_workbook.asp, reviewed July 21, 2008. I would have to say that New Balance Shoe Company is a nonessential type of product. There might be avid runners out there that would negotiate this fact with me. There could also be the thought that wearing shoes is essential in our culture today, so would that make shoes an essential product like food? I feel there would not be so much thought given to price in the idea generating stage of the new product development by New Balance company as they stated in their video if this were an Inelastic product, therefore it is my conclusion that New balance shoes are a elastic product.
When looking at prices Objectives of a company it is important to know that these objectives are the goals that describe what a business wants to achieve through pricing. Another important factor is that these objectives must be stated explicitly, and the statement should include the time frame for accomplishing them. In researching New Balance Company it seems that they did not use “survival” due to their pricing structures. On their website they do offer an online store however there were no huge price reductions just your average seasonal sales and clearance. I think that their online store does promote the strategy of profit maximization because there is less overhead and they stressed the importance of reducing there manufacturing process from 8 days to 8 hours therefore having inventory readily available with holding no inventory. I do think that they incorporate the “return on investment” objective given this statement in this article; “they look at material costs, labor costs, and overhead costs, as well as any special treatments the shoe design may include, such as specially molded pieces, labels, or embroidery. As product development progresses, the teams create a rough cost estimate that will be a major factor in the retail price. Material costs are a key factor in any athletic shoe. http://kucourses.com/ec/courses/24794/CRS-MT2190703a-3000308/ReadingPDFs/kaplan_marketing_unit07.pdf , p.28. I do feel that they absolutely see value in the “market share” objective. They are aware that currently they are #3 below Nike, and Rebook. I am sure they would like to be #1 or #2, however are happy with #3. I do not see where this company has to consider “cash flow” as a part of marketing strategy. I do feel that they use Status Quo as an objective, in the video they stated that the reputation of a great athletic shoe has set them apart. They use the Status Quo of there label “new balance” and they rely on very little else. They use no endorsements outside just their great shoe. The product quality objective is a bit hard because I do feel that New Balance does have a goal to set themselves in a higher quality athletic shoe than all others, however they are very concerned about what the competitor is doing, by searching the competitors shoe that
so far as to buy one to test it.
In analyzing price and non-price competition and given that the description from our text states, “ non-price competition occurs when a seller decides not to focus on price and instead emphasizes distinctive features, services, product quality, promotion, packaging, and other factors to distinguish its product from competing brands. http://kucourses.com/ec/courses/24794/CRS-MT2190703a-3000308/ReadingPDFs/kaplan_marketing_unit07.pdf ,p.4 From New balances marketing campaign as it stands currently from their website and from the descriptive in their video clip, it seems they are very focused on making the best athletic shoe they can with the latest and greatest technology. Their packaging, branding, and label play a large part in how they display there shoes. I think that they are excellent at knowing how much it costs to make a shoe and creating a price for the shoe that is a win / win for buyer, seller, and consumer.

I think that they are not really the seller so we can not go to far into pricing strategies that the seller might use in the retail store. New balance does offer a suggested retail price that they have come up with doing all their cost analysis but beyond that it is up to the retailer to know what pricing strategies to use that were listed in our text. However they are creating a product that has to have customer loyalty to the brand in the retail setting. There is a second price that has to be considered in a situation like this which is the wholesale price. My father owns a European comfort shoe store which I managed for some time; I do know that the industry has different levels of wholesale pricing depending on how many pairs you purchase. They stated in their video clip that they do use differential pricing which is charging different prices to different buyers for the same quality and quantity of product. Many of the pricing strategies listed would be for a retail establishment selling New Balance shoes. As the wholesale company and manufacturer of New Balance shoes they could use product Line pricing which include captive pricing, premium pricing, possibly bait pricing but I do not see this for this company. This company could reference pricing in how they display the shoe when the rep comes into the retail location to do a show for season buy. Odd- even pricing tactics would be used more by the retailer or online sales, however I do think New Balance company does use prestige pricing strategies to set the price. Promotional pricing strategies would be used more by the retailer, however I am sure they do use some of this on their website in terms of the “online store” http://www.nbwebexpress.com/category.asp?type=wmftrn&perpg=16&showdetails=yes&filtersize=&filterwidth=&filterlast=&sortby=asc&page=2, reviewed July 21, 2008.

In closing I would like to say that New Balance company really sold me on their integrity as a company in keeping there local United States manufacturing facility, if there is one marketing strategy that they could use a bit more strongly I saw was promoting those shoes that are “made in the USA”. I also was very impressed with how they made a challenge of staying local in manufacturing to actually serve this marketplace!

References:
http://kucourses.com/ec/courses/24794/CRS-MT2190703a-3000308/ReadingPDFs/kaplan_marketing_unit07.pdf , p.191
http://www.missouribusiness.net/docs/market_research_workbook.asp, reviewed July 21, 2008.
http://kucourses.com/ec/courses/24794/CRS-MT2190703a-3000308/ReadingPDFs/kaplan_marketing_unit07.pdf , p.28.
http://kucourses.com/ec/courses/24794/CRS-MT2190703a-3000308/ReadingPDFs/kaplan_marketing_unit07.pdf ,p.4
http://www.nbwebexpress.com/category.asp?type=wmftrn&perpg=16&showdetails=yes&filtersize=&filterwidth=&filterlast=&sortby=asc&page=2, reviewed July 21, 2008.

Marketing Project: Marketing process of a “new product”.

Unit 6 : Track 1: Video Case
- Project: Lextant company
Jill Stidd
MT 219

This project is ultimately tailored to explain the marketing process of a “new product”. From our text a new product is stated as, ”The term new product can have more than one meaning. A genuinely new product offers innovative benefits. But products that are different and distinctly better are often viewed as new. The following items are product innovations of the last 30 years: Post-it Notes, fax machines, cell phones, personal computers, PDAs, disposable razors, caller ID, and DVDs. A new product can be an innovative product that has never been sold by any organization, such as the digital camera when it was introduced for the first time. A radically new product involves a complex developmental process, including an extensive business analysis to determine the possibility of success. 6 A new product can also be one that a specific firm is currently launching even though other firms are already producing and marketing similar products. Finally, a product can be viewed as new when it is brought to one or more markets from another market. For example, making the Saturn VUE SUV available in Japan is viewed as a new-product introduction in Japan.” http://kucourses.com/ec/courses/24794/CRSMT2190703a3000308/ReadingPDFs/kaplan_marketing_unit06.pdf , p.166-167

For this report we were to research and evaluate Lextant company’s marketing practices. From the data I collected in my research I saw that they really understands and practices the seven phases of the new product development process. In their “idea generation” stage I feel that they began their process with not only understanding the “what” but deeply know the “why”. It seems their passion around understanding the “why” is where their initial brainstorming idea generating session was about. In the screening process, which is choosing the most promising ideas for further review it was my observation that Lextant was using the screening process throughout the processes of their attention on evaluation the user and the place of usage to the “infinity diagram” they used to place all their data collected. Lextant stressed heavily the concept testing stage which is seeking potential buyers responses to a product idea. They became the apprentice to the buyer and whom they called the “master”. They followed that person around down to the detail of watching how they brushed their teeth, if the product was toothpaste for example. They did not speak to much to the business analysis stage much at all. I did not see how they incorporated their ideas with other departments, however that infinity diagram room was very large with lots of information on it that I am sure included this analysis but it was not included in the video. Lextant seemed to have a solid understanding and implementation of the product development stage in terms of because due to their quantitative evaluation vs qualitative, they also knew that when using a prototype that focus groups might be the best format especially when there is a limited budget. I did not hear much of an opinion about there views on test marketing stage. They are marketing firm therefore setting the stage for the commercialization stage which is deciding on a full scale manufacturing and marking plan and preparing budgets is what their whole process would be in the end result, so I would have to say they were very committed to this stage.

It seemed from both the video and the lecture that this company had a real edge in the commitment to hire such diversity in employees to handle the variety of elements and segmentation that marketing strategies require. This is an excerpt from the lecture as well as said in the video, “Lextant is a Columbus, Ohio, based marketing research firm specializing in the relationship of consumer behavior to design usability. They help companies identify new product ideas, as well as develop product designs and prototypes in both consumer and business markets. One of the things the company does is to observe consumers at the point of actual product usage to gain a better understanding of the product from the consumer’s point of view. “ Lextant’s employees include behavioral scientists and those with backgrounds in cognitive psychology, anthropology, industrial and systems engineering, and other disciplines. They focus on not only products, but also on understanding people and their emotions.” Unit_6_Lecture_2-Lextant[1].doc, reviewed July 14, 2008. I feel that a marketing firm really needs this level of emotional understanding in the mix to understand service marketing and to understand the intangibility characteristic of service as well as Heterogeneity, client based relationships, and customer contact and Lextant defiantly has the diversity to get and understand that level of data.

Lextant certainly had the capacity though the in-depth processes that they used to be able to assist a company in identifying if line extensions, product modification or a new product would be the best choice for the company consider. A new product differentiates itself from the other option of marketing which is managing existing products through line extension which is the development of a product that is closely related to existing products in the line but meets different customer needs or product modification which change one or more characteristics of a product. Product modification could include, Quality modifications are changes relating to a product’s, dependability and durability, functional modifications which changes affecting a product’s versatility, effectiveness, convenience or safety, and lastly aesthetic modifications that changes to the sensory appeal of a product. From the video we saw how they helped the medical staff to see where there product was designed for a single purpose, yet through Lextant’s process of collecting data in concurred that they really needed the same product to do multiple tasks, so adjustments would need to be done to the already established product, excellent example of product modification. If line extensions were what was used then they certainly used the focus to precisely see how to satisfy the needs of the consumers with in the segment. If a new product was needed to be made all the same research and data would lead them to this conclusion and they would have all the supporting data to support the expense and time of creating, designing, and manufacturing, as well as marketing a new product.

The processes that Lextant uses for the collecting data involve working intimately with the consumer. They truly feel that that is the link to knowing the “why” factor that a product is purchased. In the video the call the consumer “the master” because the master holds the key to the information they need. I feel that through that process of working with the consumer at this intimate level that they would already to working in the the adoption process through, awareness, helping the buyer become are of the product, interest, giving the buyer information about the product therefore peeking their interest, The buyer could already be in the evaluation stage buy the first two steps deciding where they might was to purchase this product when it is released, they could even be using a trail version of the product as a prototype during this stage with the market research.

In closing I was very impressed with Lextant company as a marketing, research, and development firm. I think they had an edge that other marketing companies do not have. I feel their passion with the infinity diagram using the post it notes and giving so much time and space to this concept allowing them to immerse themselves in the data to see the patterns reveal themselves to them really sets them apart.