NEW PRODUCT Line Extension

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PRESENTRD BY GROUP NO.- 07

Abhijeet chakrabati

Himadri Sharma

Sanjeev Sharma

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What is a product ?

Product is a bundle of attributes and the total

product are the combination of two

attributes.

o Tangible attributes: materials, size, weight,

design, packaging, performance, comfort etc.

o Intangibles: brand image, styling, other benefits

(installation, delivery, credit, warranty, after-sale

service, return policy)

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Types of new product

1) 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.- ITC come in hotel andbeverages.

E.g.- iPod

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3) Line extensions are new products that allow the firm to extend its served

market by offering different benefits. e.g.- Tata Indica

4) Cost reductions are versions of existing products that provide comparable

performance at lower cost. E.g.- Dell vostro, nokias low cost mobile,Tata nano.


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5) Improvements to existing products are usually designed as replacements for

existing product offerings. E.g.- Window7, LCD is replaced by LED with 3D 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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Old model New model


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Considerations in Adding or Dropping a Variant

Adding Dropping

Customer based:

New customer attracted Old customerlost

Old customer cannibalization Customer switching

Confusion and dilution of brand equity Signal of weakness

Operation based:Loss of economies of scale Impaired efficiency

Problems in gaining additional distribution Maintaining distribution

Additional Servicing needs Servicing old versions

The development of new product typically occurs in stages. At each stage, the

product is evaluated to determine whether it makes sense to produce to the next

stage

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Product Modification

It can be done through some process like continuousquality improvement, redesigned, and updated styling.

Product modification can be of three types

Clearly better e.g.- an upgrade.

Different e.g.- ingredient change that is likely to

appeal more to

some customer.

Inferior e.g.- substitution of a less expensive

ingredients.

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Assessing the Impact of Product Redesign on Customer

Current

Customer

Reaction Response

after trial

Impact on

sale/profit

1) Loyal A. Try Prefer Gain

Like Neutral

Not like Loss

B. Not Try Loss

2) Occasional A. Try Prefer Gain

Like Neutral

Not like Loss

B. Not Try Loss

3) Non

Customers

A. Try Prefer Gain

Like Neutral

Not like Loss

B. Not Try Loss 8


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Line Extensions

Introducing additional product variant that use the existing brand name, also

known as line extension, is a popular way to capitalize on the original brands

equity.

e.g.- Surf, Surf Excel, Surf Excel Blue.

Pros and cons ofline extension

Pros

o Can appeal to multiple segment by giving slightly different wants andpreferences (e.g.- For car modellike ac or non ac etc,

multiple fares and conditions for airline seats) .

o cons-

It can confuse the customer.

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PRODUCT STAGES

1)Idea Generation

2)Concept Development

3)Feasibility Screening

4)Concept Testing

5)Product Development

6)Product Testing

7)Market Testing

8)Go No 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 analysis in particular usage/needs analyses and survey

of attitudes and attribute importance, including both unstructured ( e.g.-

focus groups) and structured ( e.g.- conjoint analysis) approaches.

o 2) Competitor analysis, specifically studying what competitors sell or working

on.

o 3) Active search, particularly of new product and process in other areas with

an eye toward incorporating them in the company own product.

o 4) Category analysis, examining changing social trend and technologies.

o 5) Ex or noncustomers who reject current product

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2) Concept Development

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4) Concept Testing

Concept testing present the consumer with a proposed product and

measure attitudes and intention at this early stage of development

The main purpose of concept test are :

a) Choose the most promising from a set of alternatives.

b) Get the initial notion of the commercial prospects of a concept.c) Find out who is most interested in the concept.

d) Indicate what direction further development work should take.

The data collection procedures fall into three major categories:

o Survey Getting large samples for projection purposes. Through survey

basically gather four types of reaction.a) Attitude ( Is the product good/bad?.

b) Uniqueness/differentiation (How unique is this product?).

c) Relevance (How relevant is the product to you?).

d) Intention (Will you bye the product?)

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o Focus group

The strength of focus groups is their diagnostic power in that

they can be used to

get detailed discussions of various aspects of the concept.

Focus group:

o Demonstrations

A popular 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 Development

Product development converts the concept into aworking product or a physical form by developing the

product architecture; design function, value, and

appearance of the product; create and develop

product specifications; and consider manufacturingand operational costs and operational constraints or

tradeoffs (POLITICS)

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7) Market Tests

The purpose of such test is to

1)Predict sales and profits from a major productlaunch.

2)Practice so that marketing, distribution, and

production skills are developed before entering full

scale operations.

In marketing testing several decisions must be made.

o Where to test

o What to doo How long

o Cost

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8) Go No go Decision

After doing lots of exercise on the new productdevelopment one should able to understand/make

decision whether go or not go for the new product

launch.

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Success Rate Entirely New Products

3000 raw

ideas

.03%

300 submitted

ideas

.3%

125 beginning

projects

.8%

9 large

developments

11%

4 major

developments

25%

1.7 launches

60%

1 commercial

success

Stevens and Burley,

RTM May-June 199720


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Why develop NDP

o To add to product portfolio

o To create stars and cash cows for the future

o To replace declining product

o To take advantage of new technology

o To defeat rivals

o To maintain/increase market share

o To keep up with rivals

o To maintain competitive advantage

o To full gap in the market

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New product can be used

o Increase/defend market share by offering more choice orupdating older products

oAppeal to new segments

o Diversify into new markets

o Improve relationship 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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NEW PRODUCT Line Extension

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