New Product Decisions

Chapter 12

New Product Decisions

Post 1995 Lessons from New Product Introductions ■ ■

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Understanding local culture and the product adaptation. In a price sensitive market like India, value for money is a good positioning slot available to marketers Make the product available in the lanes and by-lanes of the country International brand can make the firm gain an entry but cannot guarantee success Segmentation is a key to successful new product launches in the Indian market too For most consumer goods the Indian market has leapfrogged several decades, and is today a mature market 11.2

What is a New Product? ■

Change in ingredient

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Adding features

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Me-too

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Only 10% of the new products arising out of technological breakthroughs, can be really termed as new, as they are the ones to which market is not exposed.

Defining New Products New to Organization(30%)

10% new to the world

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20% new product lines 26% addition to existing product lines

Changes within existing product line 70%

26% revisions or improvements 11% repositioning 7% cost reductions 11.3

Breakthroughs Tv, Video, cassette, Cd, radio, walkman, Video camera, quartz watch, CDMA, WLL, GSM, Bluetooth, sony’s miniaturisation Eureka forbes and Ion exchange

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12.5

Factors Contributing To New Product Development ■

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Most factors are related to external environmental variables Most important internal factor is surplus capacity that the firm may have at a given point of time. Changing Customer Lifestyles,leading towards a change in the customers preferences and expectations. Technological Changes in the industry and the market. Government Policy

11.4

New Product Development Process Idea Generation Identifying Prospective Customers/ Defining Target Market Concept Development and Testing Feasibility Analysis Product Development Test Marketing Commercialization

11.5

New Product Development Stages

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12.8

Idea Generation ■ a) b) c) d) e) f) g) h) i) j)

k)

Common Sources of New Product Ideas Changing customer needs & trends in consumer markets Competitors R & D scientists Laboratories Foreign markets @ media Employees Trade channels Top management Developments in the market Changes in demographics,geographic & psycho graphic characteristics. As a natural happening eg walkman

Steps to get meaningful info from customers ■

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Develop an interview style that focuses on outcome Conduct interviews beyond lead customers Organise the information Rate the outcomes for importance of satisfaction Use the outcomes to kick off an innovation programme.

12.10

Idea Screening It is done by ■ describing the product ■ Target market ■ Competition ■ Market size ■ Product price ■ Development time and cost ■ Manufacturing cost and rate of return

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12.11

Concept development and testing Many companies try to skip this stage Product idea- A possible product that the company might offer to t he market Product concept- An elaborated version of the idea expressed in meaningful consumer terms Product Image– The particular picture that consumers acquire of an actual or potential products.

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12.12

Example A soft drink mgf wants to enter into juices . To convert this product idea into product concept , the firm must define its target customers, the primary benefits, the possible use situations.

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12.13

What can be possible concepts?

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12.14

Concept I Fresh fruit juice for children and adolescents as a health supplement at breakfast time. Concept II Fresh Bottled fruit juice for the young and the grown ups as a fun, thirst quencher, and refreshing beverage to be had at any time. Concept III Fresh bottled mango juice for adults as a health supplement Concept IV Fresh Bottled mango juice for the young and grown ups as a fun, thirst quencher, and refreashing beverage to be had at any time. 12/05/09

12.15

Product Positioning Glass Orange and lemon

Cola

Sweet New product juice

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Tetra pack

Bitter taste

12.16

Concept Testing By showing visuals to sample respondents ■ Prototype The group is then asked questions related to their ■ understanding and belief of the concept ■ the extent to which the new product will satisfy customer needs and problems, ■ the use situations ■ price in relation to the perceived value ■ purchase intentions at a given price level The results are tabulated and analyzed against industry norms. ■

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12.17

Feasibility analysis ■

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Estimation of demand in the target market at different price levels Forecasting sales based on demand estimation and competitive analysis Estimate the cost of serving the market segment, taking into account cost of transportation, warehousing, margins required by the trade to market the new product, promotion expenses, and salesforce cost Based on the cost and anticipated sales revenue, calculating the break-even price and the sales volume

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12.18

Product development The R&D department will develop one or more physical versions of the product concept. It hopes to find a prototype that best satisfies the following criteria. ■ Consumers see it as embodying the key attributes described in the product concept ■ The prototype performs safely under normal use and conditions ■ The prototype can be produced for the budgeted manufacturing costs. 12/05/09

12.19

After the prototypes are ready they should be put through rigorous functional and consumer ■ Tyre manufacturers conduct intensive stress tests ■ Pharmaceutical companies conduct clinical trials

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12.20

Test Marketing Tested on four parameters 1. Trial 2. First purchase 3. Adoption 4. Frequency and volume Example 1. Mazza 2. HLL launched Organics 3. Vazir Sultan- Charms Cigarette 12/05/09

12.21

The Innocent story. ■ In the summer of 1998 when we had developed our first smoothie recipes but were still nervous about giving up our proper jobs, we bought £500 worth of fruit, turned it into smoothies and sold them from a stall at a little music festival in London. ■ We put up a big sign saying 'Do you think we should give up our jobs to make these smoothies?' and put out a bin saying 'YES' and a bin saying 'NO' and asked people to put the empty bottle in the right bin. At the end of the weekend the 'YES' bin was full so we went in the next day and resigned. 12/05/09

12.22

Commercialisation The launch plan must consider the following 1. Timing 2. Place 3. Strategy

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12.23

Positioning Positioning “ is the act of communicating company’s offer so that it occupies a distinct and valued place in the customer’s mind.” Ways to position the brand ■ Use situations ■ Tangible benefits ■ Linking to uses ■ Head on competitive positioning ■ Life style positioning ■ Benefits offered ■

11.10

Four Major Positioning Errors 1. Under Positioning: Buyer knows much less about the brand 2. Over Positioning: Too narrow perspective of the brand 3. Confused Positioning: Because of frequent changes in positioning statements 4. Doubtful Positioning: Buyers doubt the veracity of the claims made by the firm 11.11

How to Position the Brand Perceptual Mapping involves the following: (a) Study the ideal product perception (b) Get the customers to rank these attributes in the order of importance to them (c) Customers knowledge of the competitors brands (d) How do the competitors brands fare on the ideal product map 11.12