NEW PRODUCT

DEVELOPMENT
What is the need ? ?
• Sustained Growth
• Increase Revenues
• Increase Profits
• Replace outdated / obsolete items
“World’s 25 most innovative companies have higher average
stock returns and revenue growth”
Source : Businessweek and BCG
Categories of New Products
New-to-the-World

New Product Lines

Product Line Additions

Improvements or Revisions

Repositioned Products

Lower-Priced Products
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A New Product can have several
meanings….
 New to the world products: Introduced for the first time in
the world. Eg. Split ACs, Dishwashers, A pill to cure aids, car running
on kerosene, machine to convert plastic waste into diesel !!

 New Product Lines : Firms offer new products in an

established market. Eg. ITC offered Fiama Di Willis and Vivel for
premium and mid segment in the personal care category

 Addition to existing product lines : HUL added Brooke

Bonds Natural Care and 3 Roses to the already existing brand of Brooke
Bond Red Label
 Improvement or revisions of existing products : “New and
Improved”.
Eg. Toothpastes (Closeup), Detergents (Surf Excel,Ariel), Soaps (Liril
2000), Ice creams (Creamier).

 Repositioned Products: Companies may reposition themselves to

arrest declining sales and maintain/grow market share. Eg. Airtel (Premium
segment, Corporate professionals to Youth, students), Maggi (snack to meal,
health angle), Mc Donalds

 Lower Priced Products : Performance similar to competing brands.

 Eg. Micromax, Lenovo, Canon Inkjet printer (scanner, copier, printer)
Assessing the Impact of Product Redesign on
Customers
Current Response Impact on
Customers Reaction after Trial Sales/Profits
1. Loyal A. Try 1) Prefer Gain
2) Like Neutral
3) Not like Loss
B. Not try Loss
2. Occasional A. Try 1) Prefer Gain
2) Like Trial sales gain
3) Not like Loss
B. Not try Loss
3. Noncustomers A. Try 1) Prefer Gain
2) Like Trial sales gain
3) Not Like Trial sales gain
B. Not try Neutral
Line Extensions
Introducing additional product variants that use the
existing brand name, are known as line extensions

Maggi – Atta noodles, Multigrain, Oats, Hot Heads

Horlicks – Junior Horlicks, Women Horlicks, Horlicks Flavours
(Chocolate, Banana), Horlicks Lite
Coca Cola – Coke Zero, Diet Coke, Vanilla Coke
Lifebuoy – Lifebuoy Personal, Lifebuoy Plus, Lifebuoy Gold, Lifebuoy
Active.

What are brand extensions?

 New Product
Development Process
New-Product Strategy is…

a plan that links the new-product development process with the

objectives of the marketing department, the business unit, and
the corporation.
It is a part of the overall marketing strategy

It sharpens the focus and provides general guidelines for

generating, screening and evaluating new product ideas

Has a panel of 2,50,000 teens who are asked to talk with their
friends about products or ideas that P&G sends them
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Idea Generation •

•
Wants and Needs should be
the base
Internet chatter, blog /forum
discussions
Eg.Garnier (Fructus + Oil)
Maggi 25th Anniversary (share stories,
Customers recipes, moments)

Employees • Product managers, Sales

manager, Advertising and
market research employees
Distributors

Vendors

Sources of Competitors
New-Product
Ideas R&D

Consultants
2
 Idea Generation • Channel members
(suppliers, dealers, retailers
etc.)
Eg. TVS, Samsung, LG, Hindware call for dealer
Customers meets quite frequently

Employees
• Tie up with brands for new
products at own stores
Distributors Eg. 7-11 stores with coke
introduced a blue vanilla
coke
Vendors • Inspired or copying

Sources of Competitors • P&G has 9000

research employees
New-Product
Ideas R&D External party like
McKinsey

Consultants
2
 Approaches for New Product
Development

The process of getting a group to think of

Brainstorming unlimited ways to vary a product or solve a
problem.

A focus group is a form of qualitative research in which a

group of people are asked about their perceptions,
opinions, beliefs, and attitudes towards a product,
Focus Group service, concept, advertisement, idea, or packaging.
Questions are asked in an interactive group setting where
participants are free to talk with other group members. A
group moderator leads the discussion

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• New Market / Customer Acquisition : Who else can we sell it to?

• Customer Business Expansion : What else can we sell them?

• Product variants & Line extensions : What different features can we add, replace remove

• Distribution Channel : How else can we get to the customer?

 Screening is…

the first filter in the product development process,

which eliminates ideas that are inconsistent with
the organization’s new-product strategy or are
inappropriate for some other reason.

2
Business Analysis
Demand

Considerations Cost
in
Business
Analysis Stage
Sales

Profitability

2
Business Analysis
Effect on Market Share

Considerations Cannibalization?
in
Business
Analysis Stage Enhance the company’s
image?

Competitors response, risk of failure?

2
 Development
• Creation of prototype
 Sketch marketing strategy
 Packaging, branding, labeling
 Preliminary promotion, price, and distribution strategy
 Manufacturing feasibility

The development stage can last a long time and is very expensive.

For example:
10 years for Crest toothpaste
15 years for Xerox copy machine
51 years for television
Gillette introduced three shaving systems over a 27-year period before introducing the
Mach3 in 1998 and Fusion in 2006.
It spent 3375 cr developing Mach3, and first year marketing budget was 1350 cr
2
 Development…..
• Works best when all the involved areas(R&D, marketing,
engineering, production and channel members) work together
simultaneously
Why is Global R&D so important??
 All large companies have become global – diff. countries, diff. strategies
 World’s best talents are not found in 1 country

Eg. P&G has a Connect + Develop model – After an idea is developed it sends a brief to its
network of researchers, thinkers, technology entrepreneurs and inventors around the globe for
suggestions, feedback and solutions

P&G India Products?

Ambi Pur, Ariel, Duracell, Gillette, Heads and Shoulders, Olay, Oral-B, Pampers, Pantene, Tide,
Vicks.

2
Test Marketing
Test
Marketing
The limited introduction of a product
and a marketing program to
determine the reactions of potential
customers in a market situation.

2
Common Formal Tests
 Concept testing – a test to evaluate a new-product idea, usually before
any prototype has been created. Choose the most promising from a set of
alternatives, get an idea about the commercial aspect, find out who is most
interested in the concept, indicate what direction should further development
happen

 Surveys – perception (good / bad), uniqueness, relevance, will

you buy

 Focus groups – Details on various aspects of the product

 Demonstrations – group of consumers are shown an ad / personal

demo and reactions recorded. (understanding, believe, different, dislike,
improvements, feedback, price expectation, where to shop from, usage in
terms of volume, purpose etc.
Common Formal Tests
 Product testing

 Product tests
 find product shortcomings
 commercial aspects
 alternative ideas
 relevance to various segments in the market

Tested with whom?

a) Small sample of employees
b) Limited number of customers
Common Formal Tests
 Discrimination and Preference testing
Change in product formulation – discrimination(can they know), preference
(which one they like), reaction (are they pro change)
Insurance policies, beverages, food
Fab India vs Khadi Naturals
Himalaya Group
Dabur Hingoli

 Market Tests (Commercialization)

Is the ultimate test.
Predict sales & profits
Marketing , distribution and production skills are tested

Quasi Market Tests

Simulated testing methods
 Test Marketing
• Where to test? Typically cities where purchasing habits are similar to the
national market scenario. The company should have good
distribution in these cities

Horlicks Asha  Test marketed in rural areas of AP and Karnataka.

Horlicks gets 35% of its sales from rural areas in the South.

• What to do? Get good distribution, give incentives to wholesalers, retailers,

attractive price for customers

• How long? Longer run gives more information, but what is the downside?

1. It costs more
2. Gives a chance to competitors to intervene
Keys to Eventual Sales
1. Awareness
2. The eventual proportion of consumers who try
the product (trial).
3. The proportion of triers who remain with the
brand (repeat).
4. The usage rate of the product category among
eventual users.
 World leader in specialty glass and ceramics
 In 1962, developed a ultra strong glass which was hard
to break, scratch or bend even when thickness is very
less
 Could not find commercial application till 2008! ! !
(Mobile phones, LCD, LED flat panel TVs)
 Current revenue is Rs 765 cr annually
 Corning knew that innovation always pays off, thus
always allocates 10% of revenue to R&D