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
Low HighBarriers to Followership
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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
Low HighBarriers to Followership
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.