New Product Development

Product Mix

What is new product?

Original products Product improvements Product modifications New brands that the firm develops through its own research and development efforts

Causes of New Product Failures

Overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions To create successful new products, the company must: understand its customers, markets and competitors develop products that deliver superior value to customers.

New Product Development Process

Marketing Strategy Development Concept Development and Testing Business Analysis Product Development

Idea Screening

Market Testing

Idea Generation

Commercialization

Systematic Search for New Product Ideas

Internal sources
Customers Competitors Distributors Suppliers

Idea Screening

Process to spot good ideas and drop poor ones. Criteria Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return

Concept development & Testing

1. Develop Product Ideas into Alternative Product Concepts

2. Concept Testing - Test the Product Concepts with Groups of Target Customers

3. Choose the Best One

4. Marketing strategy development

Target Markets size & structure Product Positioning Sales Goals Market Share

Part One - Overall:

Part Two - Short-Term:

Products Planned Price Distribution Marketing Budget

Part Three - Long-Term:

Sales & Profit Goals Marketing Mix Strategy

Business analysis & Product Development

Business Analysis
Review of Costs and Profits Projections to See if They Meet Company Objectives. Business Attractiveness (estimating total sales and costs and profits

If No, Eliminate Product Concept

If Yes, Move to Product Development Physical prototypes and customer tests

Consumer-Goods Market Testing

Simulated Test Market
Test in a simulated shopping environment to a sample of consumers.

Controlled Test Market

A few stores that have agreed to carry new products for a fee.

SalesWave Research
Test offering trail to a sample of consumers in successive periods.

Standard Test Market

Full marketing campaign in a small number of representative cities.

Product mix

The set of all products and items that a particular company offers for sale. All the products a given company produces comprise the product mix, or product assortment
A companys product mix has a certain width, length, depth, and consistency.

Product Mix
Width - number of different product lines Length - total number of items within the lines
Depth - number of versions of each product Product Mix all the product lines offered

Product mix

Width: the number of different product lines. Product width is the number of different products a company makes (Apple- Nano, touch, shuffle, iPhone etc...) Length: the total number of items within the line.

Depth: how many variants are offered of each product in the line or the different versions of each product that are produced (iPhone 3G/4, 8mb..) If lux has 4 variants in 2 sizes then depth is 8.

Consistency: how closely related the various product lines are in end use, production requirement, distribution channels, or some other way.

Product line

A product line refers to a number of products that are related and developed by the same manufacturer. Items within a product line generally share the same basic theme. Frequently, a product line includes different products that are offered to the public at varying price points. This way, a manufacturer or company can ensure that all products within a line will be purchased by all kinds of people. Product line extension refers to any additional products that may be added to a current product

Product-Line Length

Line Stretching- Line stretching is a strategy applied by a company to add new flavors, new colors, new varieties, new strategy used by the company minimize the costs and leverage the brand equity. Products are introduced into a product line is known as line stretching
Down-market

Up

market Two-way

Line stretching

Down-market stretch- In down stretch market, companies apply the strategy of low market for high growth opportunities. It looks for the higher margins and positions themselves as downscale . They basically focus on the mass retail such as Spencer, Wal-mart, Big Bazaar that attract millions of customers and they make a strong growth by this strategy. These are for that customer who believe in value and also gives value price for the products.

Upmarket stretch- In up stretch market, companies apply the strategy of high market for high growth.
It looks for the higher margins and positions themselves to upscale segment e.g ice cream Hagen Daaz is in up market stretch.

Two-way stretch- Companies in the middle

range of the market might decide to stretch their lines in both directions. Titan introduced its first watches in the medium price /quality segment and gradually added watches in the premium segment under the brand names Nebula & Xylus and Sonata for economy segments. This has helped Titan gain market dominance in watch category.

Line Filling

A firm can lengthen its product line by adding more items within the present range for Incremental Profits Satisfy Dealers who complain about lost sales because of missing items in the line Utilize existing capacity Try to become a full-line company Try to plug holes to keep the competitors away

One of the critical factor that a firm should consider while line filling is the Differentiation. There has to be a just-noticeable difference between the offerings other wise consumers will get confused . In the case of Maruti brands, there is a clear differentiation either in terms of design or performance between these brands. Line Filling is the strategy adopted by Maruti Suzuki to retain its grip in the Indian market