Why New product development

Products have life cycles A product has a life cycle like a man and goes through its different stage viz., introduction, growth, maturity and decline. The sale volumes of a product increase initially, reach a plateau and ultimately decline. Product innovation and new product development is very important for a company because, i) a companys existing products become obsolete and must be changed or replaced as their sales volume as well as market shares are reduced by competitive products, ii) the profits from a product generally decline as it ages.

Why New product development

Product is a basic profit determinant The profitability of any product is bound to fall in the last stage of its life cycle. Hence, the introduction of a new product at the proper time helps to maintain the companys desired level of profits. New products are essential to growth In modern competitive markets characterized by fast technological changes and developments, the watchword for the management of a company should be innovate or die. Development of new products is a must for a company that wants to grow.

 Choosy customers Todays consumer has become not only choosy but also more critical in his appraisal of the products that he buys and looks for new and better products. Resources and environmental considerations The shortages of various raw materials in the world have caused a lot of problems for the companies that have now realized that the supply of many natural resources is listed and irreplaceable. Careful product planning and development has become essential of new products that make less use of scarce resources. Two aspects are essential for successful new product development and its profitable marketing. i) proper organisational arrangements for it, and ii) skilful handling of each step involved in the process of new product development.

Why New product development

Stages in New product Development

1.Idea Generation
Idea generation is a continuous, systematic search for new product opportunities. It involves delineating sources of new ideas and methods for generating them. Methods for generating ideas include brainstorming (small-group sessions which stimulate a wide range of ideas), analysis of existing products, and surveys. Many marketing analysts suggest that an open perspective is essential: the ideas of different people should be sought; a large number of ideas should be generated; and ideas should not be criticized, no matter how offbeat they first appear

1.Idea Generation
(1) (2) (3) (4) (5) (6) (7) (8) Common Sources of New Product ideas Changing customer needs and trends Competitors R&D Scientist Laboratories Foreign Market and media Employees Trade Channels Top Management

2.Idea Screening
After the firm identifies potential products, it must screen them. In product screening, poor, unsuitable, or otherwise unattractive ideas are weeded out from further actions. Today, many companies use a new-product screening checklist for preliminary evaluation. In it, firms list the new-product attributes considered most important and compare each idea with those attributes. The checklist is standardized and allows ideas to be compared.

2.Idea Screening
Answers are sought to questions like Is there a felt need for a new product? Is it an improvement over the existing product? Is it close to our current lines of business? or does it take us to a totally new line of business? Can the existing production and marketing organization handle the product? Or does it need expertise in production and marketing front

 GENERAL CHARACTERISTICS OF NEW PRODUCTS Profit potential Existing competition Potential competition Size of market Level of investment Patentability Level of risk MARKETING CHARACTERISTICS OF NEW PRODUCTS Fit with marketing capabilities Effect on existing products (brands) Appeal to current consumer markets Potential length of product life cycle Existence of differential advantage Impact on image Resistance to seasonal factors

2.Idea Screening

2.Idea Screening
PRODUCTION CHARACTERISTICS OF NEW PRODUCTS
Fit with production capabilities Length of time to commercialization Ease of product manufacture Availability of labor and material resources Ability to produce at competitive prices

Concept Testing
A firm needs to acquire consumer feedback about its product ideas. Concept testing presents the consumer with a proposed product and measures attitudes and intentions at this early stage of development. Concept testing is a quick and inexpensive way of measuring consumer enthusiasm. It asks potential consumers to react to a picture, written statement, or oral description of a product. This enables a firm to determine initial attitudes prior to expensive, time-consuming prototype development.

Concept Testing
Is the idea easy to understand? Do you perceive distinct benefits for this product over those products currently on the market? Do you find the claims about this product believable? n Would you buy the product? Would you replace your current brand with this new product? Would this product meet a real need? What improvements can you suggest in various attributes of the concept? How frequently would you buy the product? Who would use it?

Business Analysis
Are some of the factors considered in this stage of planning : Demand projections : Price/sales relationship; short- and long-run sales potential: speed of sales growth: seasonally: rate of repurchases: channel intensity Cost projections : Total and per unit costs; use of existing facilities and resources; startup vs. continuing costs: estimates of future raw materials and other costs; economies of scale; channel needs; break-even point

Business Analysis
Competition :Short-run and long-run market shares of company and competitors; strengths and weaknesses of competitors; potential competitors; likely competitive strategies in response to new product by firm Required investment : Product planning (engineering, patent search, product development, testing): promotion: production; distribution Profitability: Time to recoup initial costs; shortand long-run total and per-unit profits; control over price; return on investment (ROI); risk

Product Development
Product development converts a product idea into a physical form and identifies a basic marketing strategy. It involves product construction, packaging, branding, product positioning, and attitude and usage testing. Product-construction decisions include the type and quality of materials comprising the product, the method of production, costs and production time requirements per unit, plant capacity, alternative sizes and colors, and the time needed to move from development to commercialization. Packaging decisions include the materials used, the functions performed (such as promotion and storage), costs, and alternative sizes and colors. Branding decisions include the choice of a new or existing name, exclusivity, trademark protection, and the image sought. Product positioning involves selecting a market segment and positioning the new item against competitors and other company offerings. Attitude and usage testing center on consumer perceptions of and satisfaction with a product.

Test Marketing
Test marketing involves placing a product for sale in one or more selected areas and observing its actual performance under the proposed marketing plan. The purpose is to evaluate the product and pretest marketing efforts in a real setting prior to a full-scale introduction. Rather than inquire about intentions, test marketing allows actual consumer behavior to be observed. The firm can also learn about competitive reactions and the response of channel members. On the basis of testing, the firm can go ahead with its plans on a larger scale, modify the product and then expand its effort, modify the marketing plan and then expand its effort, or drop the product.

Test Marketing
The stage of new product development in which product and marketing programme are tested in more realistic market setting Three types: (1) Standard test Market: Small number of test cities are identified for full marketing campaigns. Then uses store audits, distributor surveys to gauge product performance. Drawbacks: Costly, interfere by cutting the price, Defensive strategies

Test Marketing
2) Controlled Test Market: Carried out in controlled panel of store. (3) Simulated Test Market: Simulated shopping environment. The research firm shows ads and promotion for variety of products including new product. Then Check reasons of purchase, attitude, usage ,satisfaction, & repurchase decisions

 After testing is completed, the firm is ready to introduce the product to its full target market. This is commercialization and corresponds to the introductory stage of the product life cycle. Commercialization involves implementing a total marketing plan and full production. Among the factors to be considered in the commercialization stage are the speed of acceptance by consumers and channel members, the intensity of distribution (how many outlets), production capabilities, the promotional mix, prices, competition, the time period until profitability occurs, and commercialization costs.

Commercialization

Commercialization
Four important decisions are required to be taken. i) decision regarding the timing of the launching of the product. ii) decision regarding the geographical area where the product is to be launched - single locality, a region, several regions, the national market or the international market. iii) decision regarding the prime prospectus to whom to target the distribution and promotion, iv) decision regarding the introductory market strategy involving the development of an action plan for introducing the new product into the target markets and allocation of the marketing budget among the different components of the marketing mix and sequencing of the various activities.

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 A brand is a name, term, sign, symbol, design or some combination of them, used to identify the productsgoods or services of one seller or group of sellers and to differentiate them from those of the competitors. Bata, Lifebuoy, Dunlop, Hot Shot, and Parker. Brand is a comprehensive term, which has two components brand name and brand mark. For example, Asian Paints has the symbol of Gattu on its pack, which is its brand mark.

Branding

Branding
A brand can convey up to six levels of meaning as shown below. ATTRIBUTES : A brand first brings to mind certain attributes. Ex. Well built, high resale value fast and so on. BENEFITS : A brand is more than a set of attributes. Customers are not buying attributes; they are buying benefits. Attributes need to be translated into functional and emotional benefits. The attribute durable could translate into the functional benefits. VALUES : The brand also says something about the producers values.Ex. Stands for high Performance, safety, prestige

Branding
CULTURE : The brand may additionally represent a certain culture. Ex. The Mercedes represents German Culture, Organized, efficient, high quality. PERSONALITY : The brand can also project a certain personality. Some time it might taken on the personality of an actual wellknown person or spokesman. USER : The brand suggests the kind of consumer who buys or uses the product. The users will be those who respect the values, culture and personality of the product

BRAND NAME: Brand name is that part of a brand which can be vocalized ex : Lux, Limca, Vicco Termeric etc., BRAND MARK: Brand Mark is that part of a brand which can be recognized but it not utterable such as symbol, design or distinctive colouring or lettering. Ex. State Bank of India Blue circle with a central dot, Air Indias Maharaja, Devil of Onida or symbol of Yogkshma of LIC, or four fingers and a palm of Anacin are all brand marks.

Brand Name & Brand mark

Trade Mark
Trade mark is a brand or part of a brand that is given legal protection because it is capable of exclusive appropriation. A trade mark protects the sellers exclusive right to use the brand name and or brand mark. A trade mark, as currently recognised in India, is a visual symbol (in the form of a word, a name, a device, a symbol, or a label) which identifies any merchant's or manufacturer's goods or services and distinguishes them from similar goods or services of competitors in the trade.

Trade Mark
RIN, TATA, Reliance, Revlon, Hawkins and Prestige,

Functions of Trade mark

A trade mark performs five main functions
(a)
:

To identify the origin or source of goods and services and distinguish them from similar products or services of other enterprises. Trade Marks facilitate the choice to be made by the consumer when buying certain products or making use of certain services. (b) To signify that all goods bearing the same trade mark have a single source.

(c) To signify that all goods bearing the same trade mark are of the same quality. However, it is to be understood that there is no legal obligation on the trade mark owner to maintain a specific quality. The brand owner is free to enhance or reduce the quality of the product. The check against deterioration of quality lies with the consumer. If a brand does not give at least the quality that the consumer associates with it, he will switch on to another brand.
(

Functions of Trade mark

d) To serve as the principal instrument in advertising and selling of goods and services. (e) A fifth function, particularly in the case of registered trade marks, has acquired importance over the years, viz. to protect the trade and business interests of the owner of the brand, as also the goodwill associated with the brand, in case of infringement of trade mark.

Copyright
Copy right is the exclusive legal right to reproduce, publish and sell the matter and form of a literary musical or artistic work. The copyright means exclusive right to do or authorise to do the following acts In the case of literary, dramatic or musical work: To reproduce the work in any material form, this includes storing it by electronic means; To perform the work in public or communicate it to the public; To make any cinematograph film or sound recording in respect of that work; To make any translation or adaptation of the work or to do any of the above acts in respect to any translation or adaptation of the work.

Copyright
Copyright in a work is not a single right, but it bundles several rights together, including a negative right. Broadly, these rights can be grouped as follows: - the right of publication; -the neighbouring (related) rights; - the right to prevent anybody from altering the content of the work that may damage the authors reputation; and -the right of authorship or the right of paternity.

1. Enables Marking Product Differentiation: Branding helps a firm in distinguishing its product from that of its competitors. This enables the firm to secure and control the market for its products. 2. Helps in Advertising and Display Programmes: A brand aids a firm in its advertising and display programmes. Without a brand name, the advertiser can only create awareness for the generic product and can never be sure ofthe sale for his product.

Advantages to the Marketers

Advantages toBranding Marketers the enables a firm to 3. Differential Pricing:

charge different price for its products than that charged by its competitors. This is possible because if customers like a brand and become habitual of it, they do not mind paying a little higher for it. 4. Ease in Introduction of New Product: If a new product is introduced under a known brand, it enjoys the reflected glory of the brand and is likely to get off to an excellent start. Thus, many companies with established brand names decide to introduce new products in the same name. For example, Food Specialties Ltd. Had a successful brand Maggie (Noodles), it extended this name to many of its new products introduced such as Tomato Ketchup, Soups, etc. Similarly Samsung extended the brand name of its Television to Washing Machines and other durable products, like Microwave oven.

1. Helps in Product Identification Branding helps the customers in identifying the products. For example, if a person is satisfied with a particular brand of a product, say tea leaves or detergent soap, he need not make a close inspection every time, he has to buy that product. Thus, branding greatly facilitates repeat purchase of the products. 2. Ensures Quality Branding ensures a particular level of quality of the product. Thus, whenever there is any deviation in the quality, the customers can have recourse to the manufacturer or the marketer. This builds up confidence of the customers and helps in increasing his level of satisfaction.

Advantages to the Customers

3. Status Symbol Some brands become status symbols because of their quality. The consumers of those brands of products feel proud of using them and adds to the level of satisfaction of the customers.

Advantages to the Customers

Do it Yourself
Visit a retail store in your locality and prepare a list of the (i) number of brandsavailable, (ii) the price of each brand, and (iii) most selling brand in respect of any three consumer non-durable products such as Toilet Soap, Detergent Powder, Cooking, Oil, Toothpaste, Tea, etc. used . .

 The activities of designing and producing the container or wrapper for the product The importance of packaging depends upon its several functions 1. Protecting the product on its route from the manufacturer to the final consumer. 2. Enhancing product use convenience 3. Helping easy brand identification 4. Rendering product handling by the retailer easy and safe. 5. Making product differentiation by the manufacturer / marketer easy and effective

Packaging

Importance of Packaging 6. Facilitating brand re positioning

7. Encouraging repeat and replacement purchases 8. Promoting the product at the point of purchase. 9. Contributing highly to profit by appealing to the consumers who are prepared to pay higher price, and by reducing handling and transportation costs and damages.

1. Primary Package 2.Secondary Packaging 3.Transportation Packaging 1. Primary Package: Refers to the products immediate container. In some cases, the primary package is kept till the consumer is ready to use the product (e.g., plastic packet for socks); whereas in other cases, it is kept throughout the entire life of the product (e.g., a toothpaste tube, a match box, etc)

Levels of Packaging

Levels of Packaging Secondary Packaging:

Refers to additional layers of protection that are kept till the product is ready for use, e.g., a tube of shaving cream usually comes in a card board box. When consumers start using the shaving cream, they will dispose off the box but retain the primary tube.

Levels of Packaging
3.Transportation Packaging It refers to further packaging components necessary for storage, identification or transportation. For example a toothpaste manufacturer may send the goods to retailers in corrugated boxes containing 10, 20, or 100 units.

1.Rising Standards of Health and Sanitation : Because of the increasing standards of living in the country, more and more people have started purchasing packed goods as the chances of adulteration in such goods are minimised. 2. Self Service Outlets: The self-service retail outlets are becoming very popular, particularly in major cities and towns. Because of this, some of the traditional role assigned to personal selling in respect of promotion has gone to packaging

Importance of Packaging

3. Innovational Opportunity Some of the recent developments in the area of packaging have completelychanged the marketing scene in the country. For example, milk can now be stored for 4-5 days without refrigeration in the recently developed packing materials. In the area of pharmaceuticals, soft drinks, etc., lots of new innovations have come in respect of packaging. As a result, the scope for the marketingof such products has increased.

Importance of Packaging

4. Product Differentiation Packaging is one of the very important means of creating product differentiation. The colour, size, material etc., of package makes real difference in the perception of customers about the quality of the product. For example, by looking at the package of a product say Paint or Hair Oil, one can make some guess about quality of the product contained in it.

Importance of Packaging

1.Product Identification Packaging greatly helps in identification of the products. For example, Colgate in red colour, or Ponds cream jar can be easily identified by its package. 2. Product Protection Packaging protects the contents of a product from spoilage, breakage, leakage, pilferage, damage, climatic effect, etc. This kind of protection is required during storing, distribution and transportation of the product.

Functions of packaging

3. Facilitating Use of the Product The size and shape of the package should be such that it should be convenient to open, handle and use for the consumers. Cosmetics, medicines and tubes of toothpastes are good examples of this.

Functions of packaging

4. Product Promotion
Packaging is also used for promotion purposes. A startling colour scheme, photograph or typeface may be used to attract attention of the people at the point of purchase. Sometimes it may work even better than advertising. In self-service stores, this role of packagingbecomes all the more important.