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Transcript of New Product Development. NEW PRODUCT IMPORTANCE Company... Sales Revenue Increase Replace...
New Product Development
NEW PRODUCT IMPORTANCE
Company . . . • Sales Revenue Increase
• Replace “fading”
products • Spread Risk • Innovate or Die
Societal . . . • Create jobs • Increase standard of
living • Increase competition
Categories of New products
• New to the Market – Entirely new product
• New Product Lines – Entering established market for the first time , Nike-Running shoe to sports market….Athletic shoes,clothing,equipment
• Additions to existing product lines – supplement established product lines ( Package sizes , flavors , and so on )
• Improvements & Revisions of existing products – Greater perceived value & replace existing products (Gillette –M3Power,Swift)
• Repositionings - New Market , new segments
THE NEW-PRODUCT PLANNING PROCESS
2. PRODUCTSCREENING
3. CONCEPT TESTING
4. BUSINESSANALYSIS
5. PRODUCTDEVELOPMENT
1. IDEAGENERATION
7. COMMERCIALIZATION6. TESTMARKETING
I-Idea Generation & Screening Stage
Idea Generation:• NPD starts with Idea Generation --- The
systematic search for New-product Ideas
IBM – ‘Innovation Jam’ – Online suggestion box (Ideas for new products and services )
Generated 46,000 Ideas from 1,50,000 people in more than 160 countries over three days )
IdeasIdeasIdeas
Ideas
Idea
sId
eas
IdeasIdeas Ideas
Ideas
Product ideaProduct idea
SOURCES OF NEW PRODUCT IDEAS
Principle: Set the climate for innovation
– Company: customers, R&D, - sales force, employees
• Channel members• Researching Competitors products &
services• Employees - Toyota claims– 2 million
Ideas every year , 85% are implemented• Launch of BYTES – wafer chocolate from
Cadbury India was from a company Driver• The Kitchen Of India brand by ITC was
based on suggestions by master Chef• Government/Universities
Case: P&G
P&G emphasizes observational techniques with its customers.
• Brand marketers spend 12 hours a month with consumers watching how they wash clothes , cleans Teeth , clean floors , their habits and sources of frustration.
• For Diapers mothers bringing their babies to labs to study.
• To develop Cover Girl – all day lip color it was tested on 30,000 women.
• They were invited to lab each morning , apply lipstick and record their activities.
• Torture tests – eating spaghetti to showering.
This blockbuster product was a market
leader.
Idea Committee
Idea Screening:• minimize risk by
focusing on ideas with the highest probability of success
• Drop error• Go- Error
“I have got a great Idea”
“It won’t work here”
“We have tries it before”
“This isn't the right time”
“It can’t be done”
“Its not the way we do things”
“It will cost too much”
“Lets discuss it at our next meeting”
II-Concept Development &Testing
• Describe a product idea in functional, objective and subjective terms to create a product concept (image).
• The product concept is presented to targeted customers to gain their reaction(s).
• Product ideas are accepted/rejected/modified.
A large processing company gets the Idea of producing a powder to add to milk to increase its nutritional value and Taste
This is a product Idea ; but consumers buy product concepts
Product Idea into several concepts:-
Who will use this product? – it can be aimed at infants , children , teenagers , or middle-aged adults or older adults
What primary benefit should this product provide? – Taste , Nutrition , refreshment , energy
When will people consume this drink? – Breakfast , mid-afternoon , dinner , late-evening
By answering to this company can form several concepts:
Concept – 1 An instant breakfast drink for adults who want a quick nutrition breakfast without preparation
Concept – 2 A tasty snack drink for children as a midday refreshment
Concept – 3 A health supplement for older adults to drink in the late evening before they go to bed
Concept testing
• Elaborated version of test :“ Our product is a powdered mixture that is added to milk
to make an instant breakfast that gives the person all the needed nutrition among with good taste and high convenience. The product will be offered in three flavors ( Chocolate , Vanilla and Strawberry) and would come in Individual packs, ten to a box, at Rs. 110 a box )”
New Product Development ProcessStep III. Marketing Strategy Development
New Product Development ProcessStep III. Marketing Strategy Development
Part Two Describes Short-Term:Product’s Planned Price
DistributionMarketing Budget
Part Two Describes Short-Term:Product’s Planned Price
DistributionMarketing Budget
Part Three Describes Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Part Three Describes Long-Term:Sales & Profit Goals
Marketing Mix Strategy
Marketing Strategy Statement Formulation
Part One Describes Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
Part One Describes Overall:Target Market
Planned Product PositioningSales & Profit Goals
Market Share
For instant breakfast milk is families with children who are receptive to new , convenient , nutritious and inexpensive form of breakfastPositioned at Higher price , higher quality end of the instant-breakfast drink category
Initially 10% of market share with a loss not exceeding Rs. 50 million , next year 14% market share with profit Rs. 110 million
It will be offered in three flavors Vanilla , Chocolate and Strawberry and sold at Rs. 110 a box , Schemes for dealers , Sales promotion budget , Advertising budget of 175 million : Television and print
The company intends to win 25% market share and realize after tax return on investment of 12% Quality to be improved with time Price initially high and then lowered graduallyPromotion budget to be boosted each year by about 20% and so on
New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development
New Product Development ProcessStep 5. Business AnalysisStep 6. Product Development
Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
Business Analysis
Review of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives
If Yes, Move to Product Development
If Yes, Move to Product Development
If No, Eliminate Product Concept
If No, Eliminate Product Concept
Step 6 : Product Development
• Prototype Development Stage• Converts a product idea into a physical form (prototype)
– R&d– Value analysis of components – cost - quality-performance tradeoffs)– Packaging choices– Time consumption– At Gillette almost everyone gets involved in new-product testing-
every working day 200 volunteers from various departments come to work unshaven , troop to the second floor.
“We will bleed so you’ll get a good shave at home.” says a Gillette employee .
Test Marketing
Test Marketing
StandardTest Market
Full marketing campaignin a small number of representative cities.
StandardTest Market
Full marketing campaignin a small number of representative cities.
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
P&G did in Pakistan to launch
a brand of Ariel
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
P&G did in Pakistan to launch
a brand of Ariel
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
New Product Development ProcessStep 7. Test Marketing
New Product Development ProcessStep 7. Test Marketing
New Product Development ProcessStep 8. Commercialization
New Product Development ProcessStep 8. Commercialization
When?When? Where?Where? To Whom?
To Whom? How?How?
Commercialization is the Introduction of the New Product into the Marketplace
P&G
• Crest was the product that had taken a long time to develop. It took fifteen years after stannous fluoride had been identified as a potential anti cavity fighter to introduce Crest toothpaste in 1955.
• P&G sometimes took several years to develop a product. In the case of "Pampers", it took more than ten years just to figure out how to develop the product and commercialize production.
AwarenessAwareness
InterestInterest
EvaluationEvaluation
TrialTrial
AdoptionAdoption
New Product Adoption Process
Loyalty?
Influences on the Rate of Adoptionof New Products
Influences on the Rate of Adoptionof New Products
DivisibilityCan the innovation
be used on a trial basis?
CompatibilityDoes the innovation
fit the values and experience of the
target market?Complexity
Is the innovation difficult to
understand or use?
Relative AdvantageIs the innovation superior
to existing products?
Communicability Can results be easily
observed or described to others?
ProductCharacteristics