Crl9 New Product Development A

New Product Development

Prof. Grover

New Product Development - Challenges New Product Development (6-categories) • New to world – new products for new markets (Pentium) • New to market – repositioning to new markets or segments (Alto for rural market) • New to seller – additions to existing product lines (Alto car) • New to producer – new product line (MarutiVarna) • New to existing market – new product with better (lower cost) performance (M-800 with MPFI)

New Product Development - Challenges Consumer tastes are changing fast Cos. need to bring in stream of new products and services New Product Strategy must match Co. objectives The route to new product are 3 three: Acquisition (buy another company) (Kelvinator bought by Whirlpool?) Acquire patents from another company (Crocin tablets/ syrup: Glaxo SKF; Cibaca toothpaste: Glaxo to P&G) Licensing to manufacture Produce some one else's’ product

New Product Development - Challenges New Product: different or new in ANY way (Computer, iPod, Mobile phone, Any other ?)

Such products come from own R&D Dept. Innovation can be very risky due to high cost. Ex_ Clorox detergent; new coke; New product survival rate expected is 20% It is necessary to reduce this failure rate; by systematic new product development process

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New Product Development: Major Stages Idea Generation Idea Screening Concept Development and Testing

Marketing Strategy Business Analysis Product Development Test Marketing

New Product Development Process Stage 1 Idea Generation and Sources • • • • •

Customers Employees Competitors Need formal program: R&D Any source of idea is good; petrol^food; books^coffee; ipod^portable-handy • Ideas can be Promising, Marginal or Rejects

New Product Development Process (2) Stage 2 Idea Screening • • • • • •

In pharmacy, 1 of 5,000 new drug ideas is common In autos, 1 of 20 new car concepts is made to prototype In industrial products, 1 in 10 new ideas see the light of the day Why? because brainstorming and research cut them down. Short and long run viability performance Social issues: • •

Consumer welfare Safety

Areas of Success

Relative wt.

Product score

Product Rating

Unique

0.4

80

32

High performance

0.3

60

18

Low competition

0.3

50

15

New Product Development Process (3) Stage 3 Concept Development & Testing 1. Concept development 2. Concept testing 3. Concept analysis – Examine consumer perceptions and acceptability

New Product Development Process (4) Stage 4 Marketing strategy 1. To introduce product in market. 2. Target market size, Structure, Behaviour 3. Consider views of retailers and wholesaler 4. Evaluate convenient nutritious inexpensive breakfast

New Product Development Process (5) Stage 5 Business Analysis 1. Estimating total sales 2. Estimating costs and profits 3. If found viable go to development stage

New Product Development Process (6) Stage 6 Product Development (can go hand-inhand with business analysis) 1. Product tests (physical proto-types or virtual, product ranking) 2. Risky: (performance results) 3. Consumer marketing testing 4. Business goods marketing testing 5. Prototype product and marketing strategy 6. Longest process

New Product Development Process (7) Stage 7 Test Marketing 1. 2. 3.

Standard test markets Controlled test markets Simulated test markets

• How many cities (2-6); Select Test Cities (Delhi or Mumbai?); length of test (few months to a year). • Sometimes, line extensions are not tested

New Product Development Process (8) Stage 8 Commercialization WHEN WHERE TO WHOM HOW

• • • •

Timing Geographic strategy Target market prospects Introductory market strategy

• Commercialization takes a substantial amount of investment (New Coke) • Some firms “roll out” their products gradually (movies)

New Product Development Process (9) Stage 9 Consumer Adoption Process What is Adoption?  Factors influencing adoption: • Adoption is an individual’s decision to become a regular user of a product.

• Readiness to try • Characteristics of innovation; • Organizational readiness to adopt innovation • Some firms “roll out” their products gradually (movies)

New Product Development Process (9) Stages in the Adoption Process Awareness Interest Evaluation Trial Adoption

Adopter Categorization

Spread of New Products: Diffusion of Innovation Innovators (first 2½%) Early adopters (next 13½% ) Early majority (next 34% ) Late majority (next 34%) Laggards (last 16% )

Ansoff’s Matrix (Product/Market Matrix)

New Prod ucts

Ex is tin g Pro duct s

Existing Markets Market Penetration

Product Development

New Markets Market Development

Diversification

Fashion Changes Quickly

How to Have New Product Failure – New product failure (70-80% of brands; 80% packaged goods) – How to fail: Offer no unique benefit (Pepsi’s clear soda) Race to market (Netscape) Give little thought to promotion ( ) Give little thought to competition (Wal-mart’s impact) Skip research or conduct half-baked research Try just one new product (top consumer good companies average trying 75 new products a year)

Historic product failures

Diversify with new products

Summary Categories of New Products New Product Development Process Global / spread of new products Diffusion of Innovations New product failures