Kingston Npd

New product Development

Kingston Rumao Roll no 49 S.y.m.m.s SUBMITTED TO : SUBBARAO SIR

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Allen & Hamilton survey reported that seven hundred companies expected that 31% of their profits would come from NEW PRODUCTS ITRODUCTION in the next few years

How can a company add new products ? 

Acquisition • Buy • Buy • Buy

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other companies selected patents a license or franchise from other company

New product development • Can • Can

develop within its own R&D . contract the NPD firms to develop

Many Organizations pursue both the above ways

What do we mean by new products?     

Original products Improved products Modified products New brands Whether consumer see them as “NEW”

What are new products? Newness to the company and to the market      

New to the world New product line Addition to existing product line Repositioning to new market segments Improvements/revisions Cost reductions

Types of new products 10%

20% New product lines

26%

New to the world

26%

Additions to existing product line

Revisions /improvements to existing products 11% Cost Reductions

7% Repositioning

Objectives of New Product and Market Development : •

Maintain position as a product innovator

•Defend a current market share position •Establish a foothold in a future new market, Preempt a market segment •Exploit technology in a new way •Capitalize on distribution strengths •Provide a cash generator •Use excess or off-season capacity

The New product Dilemma 

The existing products are vulnerable to changing consumer needs and tastes, new technology , shortned product life cycles and increased domestic and foreign competition.

Why New products fails ? 

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High level executive pushing the idea through, in spite of negative Market research findings. Idea may be good but overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions

Risks in developing new products? 

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Texas Instruments lost $660 million before withdrawing from the home computer business RCA lost $575 million on its ill fated videodisc player. Ford lost $350 million on its ill fated EDSEL. Du Pont lost on estimated $100 million on its synthetic leather called CORFAM

Failure rate for NPD 

40% for consumer products

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20% for industrial

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18% for services

What is to be done to make new products successful? To create successful new products, the company must: 

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Understand it’s customers, markets and competitors Develop products that deliver superior value to customers.

Hindrance to successful new product 

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Shortage of important new product ideas in certain areas Fragmented markets Social and Government constraints Costliness of the NPD Faster development time Shorter product life cycles.

Steps in New Product Development process         

Idea Generation Idea Screening Concept Development & Testing Marketing Strategy Development Business Analysis Small Batch Prototype Development Product Development & Testing Test Marketing Commercialization / Launch

New Product Development Process Step 1. Idea Generation Systematic Search for New Product Ideas Internal sources Customers Competitors Distributors Suppliers

New Product Development Process Step 2. Idea Screening Process to spot good ideas and drop poor ones  Criteria • Market Size • Product Price • Development Time & Costs • Manufacturing Costs • Rate of Return 

New Product Development Process Step 3. Concept Development & Testing 1. 1. Develop DevelopProduct ProductIdeas Ideasinto into Alternative Alternative Product ProductConcepts Concepts

2. 2. Concept ConceptTesting Testing--Test Testthe the Product ProductConcepts Conceptswith withGroups Groups of ofTarget TargetCustomers Customers

3. 3. Choose Choosethe theBest BestOne One

New Product Development Process Step 4. Marketing Strategy Development Marketing Strategy Statement Formulation Part Part One One -- Overall: Overall:

Target Target Market Market Planned Planned Product Product Positioning Positioning Sales Sales & & Profit Profit Goals Goals Market Market Share Share

Part Part Two Two -- Short-Term: Short-Term: Product’s Product’s Planned Planned Price Price Distribution Distribution Marketing Marketing Budget Budget

Part Part Three Three -- Long-Term: Long-Term: Sales Sales & & Profit Profit Goals Goals Marketing Marketing Mix Mix Strategy Strategy

New Product Development Process Step 5. Business Analysis Step 6. Product Development Business Business Analysis Analysis Review Review of of Product Product Sales, Sales, Costs, Costs, and and Profits Profits Projections Projections to to See See ifif They They Meet Meet Company Company Objectives Objectives IfIf No, No, Eliminate Eliminate Product Product Concept Concept IfIf Yes, Yes, Move Move to to Product Product Development Development

New Product Development Process Step 7. Test Marketing Standard Standard Test Test Market Market Full Fullmarketing marketingcampaign campaign in a small number in a small numberof of representative cities. representative cities.

Controlled Controlled Test Test Market Market AAfew fewstores storesthat thathave have agreed agreedto tocarry carrynew new products productsfor foraafee. fee.

Simulated Simulated Test Test Market Market Test Testin inaasimulated simulated shopping environment shopping environment to toaasample sampleof of consumers. consumers.

Product Product Life Life Cycle Cycle Sales and Profits ($) Sales

Profits Time Product Development

Losses/ Investments ($)

Introduction

Growth

Maturity

Decline

Introduction Introduction Stage Stage of of the the PLC PLC Sales Sales

Low Low sales sales

Costs Costs

High High cost cost per per customer customer

Profits Profits Product Product

Negative Negative Create Create product product awareness awareness and and trial trial Offer Offer aa basic basic product product

Price Price

Use Use cost-plus cost-plus

Distribution Distribution Advertising Advertising

Build Build selective selective distribution distribution

Marketing Marketing Objectives Objectives

Build Build product product awareness awareness among among early early adopters adopters and and dealers dealers

Growth Growth Stage Stage of of the the PLC PLC

Sales Sales

Rapidly Rapidly rising rising sales sales

Costs Costs

Average Average cost cost per per customer customer

Profits Profits

Rising Rising profits profits

Marketing Marketing Objectives Objectives

Maximize Maximize market market share share

Product Product

Offer Offer product product extensions, extensions, service, service, warranty warranty Price Price to to penetrate penetrate market market

Price Price Distribution Distribution Advertising Advertising

Build Build intensive intensive distribution distribution Build Build awareness awareness and and interest interest in in the the mass mass market market

Maturity Maturity Stage Stage of of the the PLC PLC

Sales Sales

Peak Peak sales sales

Costs Costs

Low Low cost cost per per customer customer

Profits Profits

High High profits profits

Marketing Marketing Objectives Objectives

Maximize Maximize profit profit while while defending defending market market share share Diversify Diversify brand brand and and models models Price Price to to match match or or best best competitors competitors Build Build more more intensive intensive distribution distribution

Product Product Price Price Distribution Distribution Advertising Advertising

Stress Stress brand brand differences differences and and benefits benefits

Decline Decline Stage Stage of of the the PLC PLC

Sales Sales

Declining Declining sales sales

Costs Costs

Low Low cost cost per per customer customer

Profits Profits

Declining Declining profits profits

Marketing Marketing Objectives Objectives

Product Product

Reduce Reduce expenditure expenditure and and milk milk the the brand brand Phase Phase out out weak weak items items

Price Price

Cut Cut price price

Distribution Distribution Advertising Advertising

Go Go selective: selective: phase phase out out unprofitable unprofitable outlets outlets Reduce Reduce to to level level needed needed to to retain retain hard-core hard-core loyal loyal customers customers

Market entry strategies. There are two market entry strategies: 1.Pioneer strategy. 2. Follower strategy.

Pioneer strategy: Conventional wisdom holds that although they take the greatest risk and probably experience more failures than their more conservative competitors , successful competitors are handsomely rewarded. it is assumed competitive advantages inherent in being the first to enter a new product market can be sustained through the growth stage and into the maturity stage of the plc, resulting in a strong share position and substantial

Potential sources of competitive advantages available to pioneers are: 1.Frist choice of market segments and position: The pioneer has the opportunity to develop a product offering with attributes most important to the largest segment of customers or to promote the importance of attributes that favor its brand. thus pioneers brand can become a standard of reference customers use to evaluate other brands. E.g. EXIDE BATTERIES.

2. The pioneer defines the rule of the game: The pioneers action on such variables as product quality, price, distribution, warranties, post-sale service, and promotional appeals and budget sale standard that subsequent competitors must meet or beat. if the pioneers set those standards high enough, it can raise the cost of entry and perhaps preempt some potential competitors.

3. Distribution advantages: The pioneer has the most option in designing a distribution channel to bring the new product to the market. the pioneer is the first in the market and hence the distribution system can be increased easily. E.g. EXIDE BATTERIES.

4. Economies of scale and experience: Being first means the pioneer can gain accumulated volume and experience and thereby lower per unit costs at a faster rate than followers. E.G : EXIDE, MARUTI 800

5. High switching costs for early adopters: Customers who are early to adopt a pioneers new product may be reluctant to change supplies when competitive products appear. This is more in case of industrial goods where the cost of switching is high.Compatiable equipment and spare parts, investment in employee training and the risk of lower product quality or customer service make it easier for the pioneer to

6. Possibility of positive network effect: The value of some kinds of goods and services to an individual customer increases as greater numbers of other people adopt the product and the network of users grow larger. E.G. eBay.

Follower strategy: In many cases a firm becomes a follower by default it is simply beaten to a new product

market by a quicker competitor. The pioneer shoulder the initial risk while the followers observe their shortcomings and mistake.

Advantages of follower strategy are as followers:

1.Ability to take advantage pioneers positioning mistakes:

of

the

If the pioneer misjudges the preferences and purchase criteria of the massmarket segment or attempts to satisfy two or more segments at once, it is venerable to the introduction of more precisely positioned products by a follower. E.g.. Titan watches

2. Ability to take advantage of the pioneers product mistakes: If the pioneers initial product has technical limitations or design flaws, the follower can benefit by overcoming these weaknesses. E.g.. Compaq capturing commercial PC market

3. Ability to take advantage of the pioneers marketing mistakes: If the pioneer makes any marketing mistakes in introducing a new entry, it opens opportunity for later entry. E.G. Microsoft widows operating system.

4. Ability to take advantage of the latest technology: In industries characterized by rapid technological advances, followers can possibly introduce products based on a superior second generation technology and thereby gain an advantage over the pioneer. E.g.. Honda Motors.

5. Ability to advantage of pioneers limited resources: Is the pioneer has limited resources for production facilities or marketing programs or fails to commit sufficient resources to its new entry, followers willing and able to outspend the pioneer experience few enduring constraints. E.g.. Lotus Operating System

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