39900149 New Product Line Extension

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What is a product ?

Product is a bundle of attributes and the total product are the combination of twoattributes.o T angible attributes: materials, size, weight,

design, packaging, performance, comfort etc.o Intangibles: brand image, styling, other benefits

(installation, delivery, credit, warranty, after-saleservice, return policy)

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Types of new product1

) New to the world products are products that create entirely new markets.

2) New product lines are products that represent entries into existingmarkets that are new to the firm. E.g.- I TC come in hotel and

beverages.

E.g.- iPod

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3 ) Line extensions are new products that allow the firm to extend its servedmarket by offering different benefits. e.g.- T ata Indica

4) C ost reductions are versions of existing products that provide comparable performance at lower cost. E.g.- Dell vostro, nokias low cost mobile, T ata nano.


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5 ) Improvements to existing products are usually designed as replacements for existing product offerings. E.g.- Window7, L C D is replaced by LED with 3 D screen.

6) Repositioning are modest technical improvements that allow a product to offer new applications and serve new needs. E.g.- Fiat cars

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Ol d mode l N ew mode l


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Considerations in Adding or Dropping a Variant

Adding Dropping

Customer based:N ew customer attracted Ol d customer lostOl d customer canniba lization Customer switchingConfusion and di lution of brand equity Signa l of weakness

Operation based:Loss of economies of sca le Impaired efficiencyProb lems in gaining additiona l distribution Maintaining distribution

Additiona l Servicing needs Servicing o ld versions

The deve lopment of new product typica lly occurs in stages. At each stage, theproduct is eva luated to determine whether it makes sense to produce to the nextstage

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Product Modification

It can be done through some process like continuousqua lity improvement, redesigned, and updated sty ling.

Product modification can be of three types

C lear ly better e.g.- an upgrade.

Different e.g.- ingredient change that is like ly toappea l more to

some customer.

Inferior e.g.- substitution of a less expensiveingredients.

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Assessing the Impact of Product Redesign on Customer

CurrentCustomer

Reaction Responseafter trial

Impact onsale/profit

1) Loyal A. Try Prefer Gain

Like Neutral

Not like Loss

B. Not Try Loss2) Occasional A. Try Prefer Gain

Like Neutral

Not like LossB. Not Try Loss

3) NonCustomers

A. Try Prefer GainLike NeutralNot like Loss

B. Not Try Loss 8


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Line Extensions

Introducing additiona l product variant that use the existing brand name, a lsoknown as line extension, is a popu lar way to capita lize on the origina l brandsequity.e.g.- Surf, Surf Exce l, Surf Exce l Blue.

Pros and cons of line extensionPros

o Can appea l to mu ltip le segment by giving s light ly different wants andpreferences (e.g.- For car mode l like ac or non ac etc,

mu ltip le fares and conditions for air line seats) .o cons-

It can confuse the customer.

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PR O DUCT STAGES

1)Idea Generation2)Concept Deve lopment3)Feasibi lity Screening4 )Concept Testing5 )Product Deve lopment6)Product Testing7)Market Testing8 )Go N o go Decision

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1) Idea Generation

Idea for product modifications and extensions comes from many sources, bothproactive and reactive:

o Through customer ana lysis in particu lar usage/needs ana lyses and surveyof attitudes and attribute importance, inc luding both unstructured ( e.g.-focus groups) and structured ( e.g.- conjoint ana lysis) approaches.

o 2) Competitor ana lysis, specifica lly studying what competitors se ll or workingon.

o 3) Active search, particu lar ly of new product and process in other areas with

an eye toward incorporating them in the company own product.

o 4 ) Category ana lysis, examining changing socia l trend and techno logies.

o 5 ) Ex or noncustomers who reject current product

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2) Concept Deve lopment

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4 ) Concept Testing

Concept testing present the consumer with a proposed product andmeasure attitudes and intention at this ear ly stage of deve lopment

The main purpose of concept test are :a) Choose the most promising from a set of a lternatives.

b) Get the initia l notion of the commercia l prospects of a concept.c) Find out who is most interested in the concept.d) Indicate what direction further deve lopment work shou ld take .

The data co llection procedures fa ll into three major categories:o Survey Getting large samp les for projection purposes. Through survey

basica lly gather four types of reaction.a) Attitude ( Is the product good/bad?.b) Uniqueness/differentiation (How unique is this product?).c) Re levance (How re levant is the product to you?).d) Intention (Wi ll you bye the product?)

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o Focus group

The strength of focus groups is their diagnostic power in thatthey can be used to

get detai led discussions of various aspects of the concept.

Focus group:

o Demonstrations

A popu lar way to present a concept is to gather a group of consumers, present them with a story about the new productand record their reactions.

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5 ) Product Deve lopment

Product deve lopment converts the concept into aworking product or a physica l form by deve loping theproduct architecture; design function, va lue, andappearance of the product; create and deve lop

product specifications; and consider manufacturingand operationa l costs and operationa l constraints or tradeoffs (P O LITICS)

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There are three major types of product use test.First phase:

These initial

tests are diagnostic, how the product actuallyused and are directed toward e liminating serious prob lem

with the product.

Second Type:

It inc ludes a limited-time-horizon forced-tria l situation wherecustomer are given the product to use and asked for their reaction to it.

Third Type:In this type test requires p lacement of the product in home ( or business settings for industria l product) for an extended period.

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7) Market TestsThe purpose of such test is to

1)Predict sa les and profits from a major productlaunch.2)Practice so that marketing, distribution, and

production ski lls are deve loped before entering fu ll

sca le operations.

In marketing testing severa l decisions must be made.o Where to testo What to doo How longo Cost

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8 ) Go N o go Decision

After doing lots of exercise on the new productdeve lopment one shou ld ab le to understand/makedecision whether go or not go for the new productlaunch.

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Succ ess Rate Entirely New Prod uc ts

3000 rawideas.03%

300 s ubm ittedideas.3%

125 b eginningproje c ts

.8%

9 largedevelop m ents

11%

4 m ajor develop m ents

25%

1.7 la u n ch es60%

1 c o mm er c ials ucc ess

S tevens and B u rley,

RTM May-Ju

ne 199720


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Why deve lop N DP

o To add to product portfo lio

o To create stars and cash cows for the future

o To rep lace dec lining product

o To take advantage of new techno logy

o To defeat riva ls

o To maintain/increase market share

o To keep up with riva ls

o To maintain competitive advantage

o To fu ll gap in the market

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N ew product can be used

o Increase/defend market share by offering more choice or updating o lder products

o Appea l to new segments

o Diversify into new marketso Improve re lationship with distributors

o Maintain the firms reputation a leading edge company

o Even out peaks and troughs in demand

o Make better use of the organization's resources

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39900149 New Product Line Extension

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