Description
describes the steps to be followed in new product devlopment.
New Product Development Strategy
Because of the rapid changes in consumer tastes, technology, and competition, companies must develop new products and services. A firm can obtain new products in two ways; • Acquisition; buying a whole company, a patent, or a license. • New-product development; developing original products, product improvements, product modification, and new brands
New Product Introduction
Why are New Products Introduced? • To sustain the growth of the organization • To utilize surplus production capacity • Long term profit growth 80 to 90% of the new products fail shortly after their introduction! Why do these failures occur? 1. Failure to identify the ‘Right Product’ 2. Several ‘Me too’ products 3. Test Marketing Ignored 4. Lack of market research expertise 5. Use of available market research expertise lacking
1
New Product Development Process
In order to find and develop successful products, the marketers must go through the following stages; Idea generation Idea screening Concept development and testing Marketing strategy Business analysis Product development Test marketing Commercialization
System for New Product Introduction
Cost
Screening
Quantitative Qualitative
Concept Test Concept Use Test Marketing Strategy Business Analysis
Product Development
33%
Test Marketing
67%
Commercialization
2
Idea Generation
New product development starts with idea generation - the systematic search for new-product ideas. Major sources of new-product ideas include: (1) Internal sources - research & development department, executives, salespeople (2) Customers (3) Competitors (4) Distributors and Suppliers (5) Others - trade magazines, seminars, government agencies, new-product consultants, marketing research firms, universities, inventors.
Idea Screening
• Idea screening reduces the number of new ideas by screening new product ideas in order to spot good ideas and drop poor ones as soon as possible. • In idea screening, market size, product price, development time and costs, production costs, rate of return and type of customers are put into consideration.
3
Idea Screening
A. Quantitative Screening
Computing Product Marketability Index: Factors that have a bearing on product success are: 1. Marketability Factors 2. Durability Factors 3. Productive Ability Factors
Quantitative Screening
Marketability Factors:
1. Present Distribution System 2. Competitive Quality and Price 3. Effect on Sales of Existing Products
Durability Factors:
1. Size of the Potential Market and Growth Rate 2. Resistance to Economic Fluctuations 3. Life Cycle of the Product
Productive Ability Factors:
1. Adequacy of Plant and Equipment 2. Adequacy of Personnel. 3. Availability of Raw Material.
4
Product Marketability Index
Factors Marketability Marketability Marketability Durability Durability Durability Productive Ability Productive Ability Productive Ability Criteria 1. Present Distribution System 2. Competitive Quality 3. Effect on Existing Products 1. Size of the Potential Market 2. Resistance to Economic Fluctuations 3. Life Cycle of the Product 1. Adequacy of Plant and Equipment 2. Adequacy of Personnel 3. Availability of Raw Material Weig hts 10 10 10 10 10 20 10 10 10 100 100 Total Weighted Score 200 80 60 80 80 60 Scores 10 100 60 8 6 4 2 Tot al 100 60 80 60 80 200 80 60 100 820
Product Marketability Index: 0.82
Idea Screening
B. Qualitative Screening
a. Motivational Research through: – Group Discussions – In-depth Interviews b. Behavioral Science Techniques Here we get the reaction of actual consumers who will accept or reject the product
5
Concept Development and Testing
An attractive idea must be developed into a product concept. Concept Development; is a detailed version of the newproduct idea stated in meaningful consumer terms. Several concepts can be developed for a product idea e.g. the idea of developing an electric car may be created in the following product concepts: (1) Inexpensive family car (2) Medium cost sporty car for young people; (3) Inexpensive car for conscious people who look for basic transportation, low fuel cost, and low pollution. The marketer must test these alternatives.
Concept Testing
Concept Testing; involves testing new-product concepts with target consumers before turning the new ideas into actual new products. The concepts may be presented to consumers symbolically or physically. After being exposed to the concept, consumers may be asked to tell their opinions. The answers will help the company decide which concept has the strongest appeal.
6
Concept Test
Concept Test is used to measure: • Uniqueness rating of the concept. • Attitude rating towards the concept. • Comparison of concept with the product currently used. • Future purchase intent of the consumer. • The acceptability of the idea with consumer.
Unique Selling Proposition
Implementation of Concept Test: 1. Develop the idea that passes through screening process into a ‘Concept Advertisement’. Emotional appeals are avoided in this advertisement. 2. Boldly display your Unique Selling Proposition in the concept advertisement headline. 3. Carry out the test as follows.
Product Illustration Picture
Product Usage Direction
Justify Claims given in the Headline
Name of the Company
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. If he is the user then proceed to find out --What Brand used and when last used? Interview people who have used the product during past one year. 2. Attitude towards various characteristics of the product used in the past e.g. Taste, Colour, Shape, Size, Odour etc. To understand this ‘Word Association Test’ is carried out. List out how many people would say something common. 3. How the Brand presently used by the interviewee compare with the product being tested.
Exposure Interview: Concept advertisement is given to the consumer
and he is given as much time as he requires to study it. Thereafter the advertisement is taken back and it is not shown to the consumer again.
7
Concept Test
Post-Exposure Interview: This interview will review the uniqueness
of the concept. This when compared with the characteristics rated earlier will reveal the weak areas in the concept and highlight: 1. How does the product compare with the Brand presently being used? 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
Concept Use Test
After the product has passed the Concept Test stage the product is produced in laboratory scale. The product is manufactured as per Concept Test and same people are interviewed within a week. Measurement of Concept Use Test is taken with reference to the same four factors listed in concept test. The scores are then compared and up to 10 to 15% fall in score of Concept Use Test is accepted. Beyond this the product is rejected and the areas of product improvement are identified and suitable changes in the product are made.
8
Marketing Strategy Development
• After all the concepts are tested, the company must develop the initial marketing strategy to introduce the best concept to the market. • At this stage, the marketing strategy consists of three parts; – the first part; describes the (1) target market, (2) the planned product positioning, and (3) the sales, market share and profit goals for the first year. – the second part; outlines the product’s planned (1) price, (2) distribution, and (3) marketing budget for the first year. – the third part; describes the planned long-run (1) sales, (2) profit goals, and (3) marketing mix strategy.
Business Analysis
Once the product concept and the marketing strategy is decided, the marketer should evaluate the business attractiveness of the proposal. Business analysis involves the projections for the sales (by looking at the sales history of similar products and getting the market opinion), costs (by looking at the forecasted sales figures), and profit for the new product to find out whether they satisfy the company’s objectives. If they do, the product can move to the product-development stage.
9
Product Development
Here, the product concept is developed into a physical product (prototype) to understand whether the product idea can be turned into a workable product. Prototypes are tested under laboratory and field conditions to make sure that the product performs safely and effectively.
Test Marketing
• After the prototype is tested under the laboratory and field conditions, the next stage is testing the product under more realistic market settings. • Test marketing allows the company to test the product and its 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 management is not sure of the product or marketing program, the companies do a lot of test marketing.
10
Test Marketing
Products 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 the event of the product gets rejected by the market the company can avoid huge losses. 2. The company can experiment with
– Media Combination – Types of Positioning – Spending Levels
3. It is easier to control the marketing mix strategies. 4. It is economical and feasible to operate in the limited markets.
Commercialization
• Commercialization is the introduction of a new product into the market. • At this stage, the company may need to spend between Rs. 50 lakhs and Rs.500 lakhs for advertising and sales promotion in the first year. • Here, the company should decide when and where the product will be introduced.
11
doc_115108748.pdf
describes the steps to be followed in new product devlopment.
New Product Development Strategy
Because of the rapid changes in consumer tastes, technology, and competition, companies must develop new products and services. A firm can obtain new products in two ways; • Acquisition; buying a whole company, a patent, or a license. • New-product development; developing original products, product improvements, product modification, and new brands
New Product Introduction
Why are New Products Introduced? • To sustain the growth of the organization • To utilize surplus production capacity • Long term profit growth 80 to 90% of the new products fail shortly after their introduction! Why do these failures occur? 1. Failure to identify the ‘Right Product’ 2. Several ‘Me too’ products 3. Test Marketing Ignored 4. Lack of market research expertise 5. Use of available market research expertise lacking
1
New Product Development Process
In order to find and develop successful products, the marketers must go through the following stages; Idea generation Idea screening Concept development and testing Marketing strategy Business analysis Product development Test marketing Commercialization
System for New Product Introduction
Cost
Screening
Quantitative Qualitative
Concept Test Concept Use Test Marketing Strategy Business Analysis
Product Development
33%
Test Marketing
67%
Commercialization
2
Idea Generation
New product development starts with idea generation - the systematic search for new-product ideas. Major sources of new-product ideas include: (1) Internal sources - research & development department, executives, salespeople (2) Customers (3) Competitors (4) Distributors and Suppliers (5) Others - trade magazines, seminars, government agencies, new-product consultants, marketing research firms, universities, inventors.
Idea Screening
• Idea screening reduces the number of new ideas by screening new product ideas in order to spot good ideas and drop poor ones as soon as possible. • In idea screening, market size, product price, development time and costs, production costs, rate of return and type of customers are put into consideration.
3
Idea Screening
A. Quantitative Screening
Computing Product Marketability Index: Factors that have a bearing on product success are: 1. Marketability Factors 2. Durability Factors 3. Productive Ability Factors
Quantitative Screening
Marketability Factors:
1. Present Distribution System 2. Competitive Quality and Price 3. Effect on Sales of Existing Products
Durability Factors:
1. Size of the Potential Market and Growth Rate 2. Resistance to Economic Fluctuations 3. Life Cycle of the Product
Productive Ability Factors:
1. Adequacy of Plant and Equipment 2. Adequacy of Personnel. 3. Availability of Raw Material.
4
Product Marketability Index
Factors Marketability Marketability Marketability Durability Durability Durability Productive Ability Productive Ability Productive Ability Criteria 1. Present Distribution System 2. Competitive Quality 3. Effect on Existing Products 1. Size of the Potential Market 2. Resistance to Economic Fluctuations 3. Life Cycle of the Product 1. Adequacy of Plant and Equipment 2. Adequacy of Personnel 3. Availability of Raw Material Weig hts 10 10 10 10 10 20 10 10 10 100 100 Total Weighted Score 200 80 60 80 80 60 Scores 10 100 60 8 6 4 2 Tot al 100 60 80 60 80 200 80 60 100 820
Product Marketability Index: 0.82
Idea Screening
B. Qualitative Screening
a. Motivational Research through: – Group Discussions – In-depth Interviews b. Behavioral Science Techniques Here we get the reaction of actual consumers who will accept or reject the product
5
Concept Development and Testing
An attractive idea must be developed into a product concept. Concept Development; is a detailed version of the newproduct idea stated in meaningful consumer terms. Several concepts can be developed for a product idea e.g. the idea of developing an electric car may be created in the following product concepts: (1) Inexpensive family car (2) Medium cost sporty car for young people; (3) Inexpensive car for conscious people who look for basic transportation, low fuel cost, and low pollution. The marketer must test these alternatives.
Concept Testing
Concept Testing; involves testing new-product concepts with target consumers before turning the new ideas into actual new products. The concepts may be presented to consumers symbolically or physically. After being exposed to the concept, consumers may be asked to tell their opinions. The answers will help the company decide which concept has the strongest appeal.
6
Concept Test
Concept Test is used to measure: • Uniqueness rating of the concept. • Attitude rating towards the concept. • Comparison of concept with the product currently used. • Future purchase intent of the consumer. • The acceptability of the idea with consumer.
Unique Selling Proposition
Implementation of Concept Test: 1. Develop the idea that passes through screening process into a ‘Concept Advertisement’. Emotional appeals are avoided in this advertisement. 2. Boldly display your Unique Selling Proposition in the concept advertisement headline. 3. Carry out the test as follows.
Product Illustration Picture
Product Usage Direction
Justify Claims given in the Headline
Name of the Company
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. If he is the user then proceed to find out --What Brand used and when last used? Interview people who have used the product during past one year. 2. Attitude towards various characteristics of the product used in the past e.g. Taste, Colour, Shape, Size, Odour etc. To understand this ‘Word Association Test’ is carried out. List out how many people would say something common. 3. How the Brand presently used by the interviewee compare with the product being tested.
Exposure Interview: Concept advertisement is given to the consumer
and he is given as much time as he requires to study it. Thereafter the advertisement is taken back and it is not shown to the consumer again.
7
Concept Test
Post-Exposure Interview: This interview will review the uniqueness
of the concept. This when compared with the characteristics rated earlier will reveal the weak areas in the concept and highlight: 1. How does the product compare with the Brand presently being used? 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
Concept Use Test
After the product has passed the Concept Test stage the product is produced in laboratory scale. The product is manufactured as per Concept Test and same people are interviewed within a week. Measurement of Concept Use Test is taken with reference to the same four factors listed in concept test. The scores are then compared and up to 10 to 15% fall in score of Concept Use Test is accepted. Beyond this the product is rejected and the areas of product improvement are identified and suitable changes in the product are made.
8
Marketing Strategy Development
• After all the concepts are tested, the company must develop the initial marketing strategy to introduce the best concept to the market. • At this stage, the marketing strategy consists of three parts; – the first part; describes the (1) target market, (2) the planned product positioning, and (3) the sales, market share and profit goals for the first year. – the second part; outlines the product’s planned (1) price, (2) distribution, and (3) marketing budget for the first year. – the third part; describes the planned long-run (1) sales, (2) profit goals, and (3) marketing mix strategy.
Business Analysis
Once the product concept and the marketing strategy is decided, the marketer should evaluate the business attractiveness of the proposal. Business analysis involves the projections for the sales (by looking at the sales history of similar products and getting the market opinion), costs (by looking at the forecasted sales figures), and profit for the new product to find out whether they satisfy the company’s objectives. If they do, the product can move to the product-development stage.
9
Product Development
Here, the product concept is developed into a physical product (prototype) to understand whether the product idea can be turned into a workable product. Prototypes are tested under laboratory and field conditions to make sure that the product performs safely and effectively.
Test Marketing
• After the prototype is tested under the laboratory and field conditions, the next stage is testing the product under more realistic market settings. • Test marketing allows the company to test the product and its 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 management is not sure of the product or marketing program, the companies do a lot of test marketing.
10
Test Marketing
Products 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 the event of the product gets rejected by the market the company can avoid huge losses. 2. The company can experiment with
– Media Combination – Types of Positioning – Spending Levels
3. It is easier to control the marketing mix strategies. 4. It is economical and feasible to operate in the limited markets.
Commercialization
• Commercialization is the introduction of a new product into the market. • At this stage, the company may need to spend between Rs. 50 lakhs and Rs.500 lakhs for advertising and sales promotion in the first year. • Here, the company should decide when and where the product will be introduced.
11
doc_115108748.pdf