8. New Product Strategies.pdf

7/29/2019 8. New Product Strategies.pdf

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New Product Development Strategy

Because of the rapid changes in consumer tastes,

ec no ogy, an compe on, companes mus eveopnewproductsandservices.

A firmcanobtainnewproductsin twoways;

Acquisition; buying a whole company, a patent, or alicense.

ew-pro uc eveopmen ; eveopng or gnaproducts, product improvements, product modification,

and new brands

New Product IntroductionWhy are New Products Introduced?

To sustain the growth of the organization To utilize surplus production capacity

80 to 90% of the new products fail shortly after theirintroduction!

Why do these failures occur?

.2. Several Me too products3. Test Marketing Ignored4. Lack of market research expertise5. Use of available market research expertise lacking


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Generic NPD Strategies

Market Driven ModifierYoure good at innovation but

it can easily be copied stream of product modifications incremental changes

High

Next Generation InnovatorYoure good at innovation and

others cant follow easily new product categories high internal investment

first to market

Moderate Investment

first to market

High Investment

Fast FollowerYoure not so good at innovation,but the types of innovation canbe co ied

AcquirerYoure not so good at innovation andits tough to copy ac uireca abilities

Leadershipin

Innovation

standby research flexible staff fast second market

Moderate Investment

leapfrog existing leader build on acquired capabilities

High Investment

ow

Low HighBarriers to Followership

Key Skills Required

Market Driven Modifier Vigilance regarding improvements Rapid innovation Tweaking Consumer knowledge

High

Next Generation Innovator Technological prowess Out of the box thinking Rapid innovation Consumer knowledge

Fast Follower Market intelligence Reverse engineering

Acquirer Commercial intelligence Financial analysis

Leadershipin

Innovation

Flexible manufacturing

of commercial synergies



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Industry Types

Market Driven Modifier

Food companies egAmul Consumer Goods egP&G Consumer Durables egSamsung

High

Next Generation Innovator Electronics egSony Software egMicrosoft Mobile Phones egApple, Nokia

Automobiles egSuzuki, Hyundai e ec noogy eg ooge

Fast Follower Fashion egTitan, Tanishq Electronics egLG, Samsung

Acquirer Electronics egPhilips Web Technology egMicrosoft

Leadershipin

Innovation

apops eg cerow


New Product Development Process

In order to find and develop successful products, themarketers must go through the following stages;

Idea screening

Concept development and testing

Marketing strategy

Business analysis

Product develo ment Test marketing

Commercialization


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System for New Product Introduction

Screening

Quantitative

Qualitative

Concept Test

Cost

Concept Use Test

33%

Marketing Strategy

BusinessAnalysis

Product

evelopment

Test Marketing

Commercialization

67%

D

Idea GenerationNew product development starts with idea generation - thesystematic search for new-product ideas.

Major sources of new-product ideas include:

(1) Internal sources - research & development department,

executives, salespeople

(2) Customers

(3) Competitors

D str butors and uppl ers

(5) Others- trade magazines, seminars, government

agencies, new-product consultants, marketing research

firms, universities, inventors.


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Idea Screening

Idea screening reduces the number of new ideasb screenin new roduct ideasinorder tos otgood ideas and drop poor ones as soon aspossible.

In idea screening, market size, product price,development time and costs, production costs, rate

consideration.

Idea Screening

A. Quantitative Screening

Computing Product Marketability Index:

Factors that have a bearing on product success are:

1. Marketability Factors2. Durability Factors3. Productive Ability Factors


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Quantitative Screening

Marketability Factors:1. Present Distribution System

Durability Factors:

1. Size of the Potential Market and Growth Rate2. Resistance to Economic Fluctuations3. Life C cle of the Product

2. Competitive Quality and Price3. Effect on Sales of Existing Products

1. Adequacy of Plant and Equipment2. Adequacy of Personnel.3. Availability of Raw Material.

Productive Ability Factors:

Product Marketability Index

Factors Criteria WeightsScores

Total10 8 6 4 2

Marketability 1. Present Distribution System 10 100 100

Marketability 2. Competitive Quality 10 60 60

Marketability 3. Effect on Existing Products 10 80 80

Durability 1. Size of the Potential Market 10 60 60

Durability 2. Resistance to Economic Fluctuations 10 80 80

Durability 3. Life Cycle of the Product 20 200 200

Productive Ability 1. Adequacy of Plant and Equipment 10 80 80

Productive Ability 2. Adequacy of Personnel 10 60 60

Product Marketability Index: 0.82

Productive Ability 3.Availability of Raw Material 10 100 100

100 Total Weighted Score 820


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Idea Screening

B. Qualitative Screening

. v u

Group Discussions

In-depth Interviews

b. Behavioral Science Techniques

Here we get the reaction of actual consumers who

will accept or reject the product

Concept Development and Testing

An attractive idea must be developed into a product concept.

Concept Development; is a detailed version of the new-product idea stated in meaningful consumer terms. Severalconcepts can be developed for a product idea e.g. the idea ofdeveloping an electric car may be created in the followingproduct concepts:

(1) Inexpensive family car

(2) Medium cost s ort car for oun eo le;(3) Inexpensive car for conscious people who look for basic

transportation, low fuel cost, and low pollution.

The marketer must test these alternatives.


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Concept Testing; involves testing new-product concepts

Concept Testing

actual new products.

The concepts may be presented to consumers symbolicallyor physically. After being exposed to the concept,consumers may be asked to tell their opinions. The answerswill help the company decide which concept has the

.

Concept TestConcept Test is used to measure:

Uniqueness rating of the concept.

Attitude rating towards the concept.

ompar son o concept w t t e pro uct current y use .

Future purchase intent of the consumer.

The acceptability of the idea with consumer.

Implementation of Concept Test:

1. Develop the idea that passes through screening process

Unique Selling Proposition

ProductIllustration

Picture

Product UsageDirection

.avoided in this advertisement.

2. Boldly display your Unique Selling Proposition in the

concept advertisement headline.

3. Carry out the test as follows.

J ustify Claims given in theHeadline

Name of the Company


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Concept Test

Pre-exposure Interview:The purpose of this interview is to find out:

1. Whether the interviewee is a User of the type of product being tested. Ifheis theuser then roceedtofindout--WhatBrandusedandwhenlastused? Interview people who have used the product during past one year.

2. Attitude towards various characteristics of the product used in the paste.g. Taste, Colour, Shape, Size, Odour etc. To understand this WordAssociation Test is carried out. List out how many people would saysomething common.

3. How the Brand presently used by the interviewee compare with theproduct being tested.

Exposure Interview: Concept advertisement is given to the consumerand he is given as much time as he requires to study it. Thereafter theadvertisement is taken back and it is not shown to the consumer again.

Concept Test

Post-Exposure Interview:This interview will review the uniquenessof the concept. This when compared with the characteristics rated earlier willreveal the weak areas in the concept and highlight:

.2. What are the Future Purchase Intentions of the interviewee?

The following factors are assessed on a five point semantic differential scale Uniqueness Rating Attitude Rating Comparison with Brand presently used.

Future Purchase intentions

Excellent Very Good Good Somewhat Bad Bad


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Concept Use Test

After the product has passed the Concept Test stage theproduct is produced in laboratory scale.

The product is manufactured as per Concept Test and samepeople are interviewed within a week.

Measurement of Concept Use Test is taken with referenceto the same four factors listed in concept test.

score of Concept Use Test is accepted. Beyond this theproduct is rejected and the areas of product improvement

are identified and suitable changes in the product are made.

Marketing Strategy Development

After all the concepts are tested, the company must developthe initial marketing strategyto introduce the best concepto e mar e.

At this stage, the marketing strategy consists of three parts;

the first part; describes the (1) target market, (2) theplanned product positioning, and (3) the sales, marketshare and profit goals for the first year.

the second part; outlines the products planned (1) price,(2) distribution, and (3) marketing budget for the firstyear.

the third part; describes the planned long-run (1) sales,(2) profit goals, and (3) marketing mix strategy.


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Business Analysis

Once the product concept and the marketing strategy isdecided, the marketer should evaluate the businessattractiveness of the proposal.

Business analysis involves the projections for the sales(by looking at the sales history of similar products andgetting the market opinion), costs (by looking at theforecastedsales figures), and profit for the new product

o n ou w e er ey sa s y e company sobjectives. If they do, the product can move to theproduct-development stage.

Product Development

Here, the product concept is developed into ah sical roduct rotot e tounderstandwhether

the product idea can be turned into a workableproduct.

Prototypes are tested under laboratory and fieldconditions to make sure that the product performs

.


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Test Marketing

After the prototype is tested under the laboratory and field

conditions, the next stage is testing the product under morerealistic market settings.

Test marketing allows the company to test the product andits marketing program (e.g. positioning strategy,advertising, pricing, distribution, branding, packaging,budget) before going into the full introduction.

When introducing a new product requires a big investment,or when mana ement is not sure of the roduct ormarketing program, the companies do a lot of testmarketing.

Test MarketingProducts that pass the concept use test are then introduced in

select markets that are representative of the national market.

Purpose of Test Marketing

1. Because the product is marketed on a limited scale in theevent of the product gets rejected by the market thecompany can avoid huge losses.

2. The company can experiment with Media Combination

Spending Levels

3. It is easier to control the marketing mix strategies.

4. It is economical and feasible to operate in the limitedmarkets.


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Commercialization

Commercialization is the introduction of a new product intothemarket.

At this stage, the company may need to spend between

Rs. 50 lakhs and Rs.500 lakhs for advertising and salespromotion in the first year.

Here, the company should decide when and where theproduct will be introduced.

Documents

8. New Product Strategies.pdf