New Product Development

NEW PRODUCT DEVELOPMENT
What is a New Product ?

New Product means the Product new to the company
Three Most Important Questions

1. How often should company launch ? 2. Percentage of New Products to Old Products ? 3. Who should be involved in development team ?
MANAGING MARKETING PROGRAM

What is a New Product ?
Original Products : Original to company as well as the market Modified Products : Existing products with alterations Me Too Products : Copying one of the successful product in the market Product Line Acquisition : Products available from some subsidiary company

In a New Product the company will always have something NEW into the Product Mix. It could be a New Experience or New Products Why New Product ? Risky not to innovate considering the competition Consumer Expectations : Consumers expectation for steady stream of New & improved products with changes in Needs & Wants Continuous innovation is the only way to avoid Product Line Obsolescence

Why Does A New Product Fail ?
A senior level executive pushes a favorite idea in spite of negative market research findings. The idea is good, but market size is overestimated The product is not well designed The product is incorrectly positioned in the market, not advertised properly, overpriced. The development costs are higher than expected. Competitors fight back harder than expected

Difficulties in New Product Development
Shortage of important new Product ideas Fragmented Market Growing social & Government constraints Cost of New Product Development Capital shortages Faster required development time Short life span of successful products

New Product Development Stages
Idea Generation Idea Screening Concept Development Business Analysis Product Development Test Marketing New Product Launch

New Product Development Stages
The process starts with lot of ideas but only one of them gets selected for the Product Launch
1.Idea Generation :
Every New Product starts off as an Idea Most Ideas never become Products Large no. of ideas needed to locate good idea Greater the no. of ideas, better the best ones are likely to be.

2.Screening :
The purpose of Screening is to eliminate those ideas which are dissonant with either company objective or resources Typical Company Objectives are Profit, Sales growth, company image etc. Generally considered Company Resources are Capital, Know How, Physical facilities etc

2.Screening (cont.) :
In other words Screening is Quantitative evaluation of ideas against companys objectives, compatibility with existing production & distribution facilities together with gross economic factors such as potential competition etc.

3.Concept Development : Ideas which pass through screening undergo further development into fully mature Product Concept
Product Idea Product Concept Product Image

3.Concept Development (cont.):
Product Idea :- It is a possible product described in the objective functional terms that the company can see itself offering to the market. Product Concept :- It is the particular subjective concept that the company is trying to build into the product. Product Image :- It is the particular subjective picture that the consumer actually acquires of the product.

3.Concept Development (cont.):
If Product Concept and Product Image of your company is mirror image then your product would be the most successful one in market. Consumers never buys a Product Idea, but only the Product Concept which fits with their preferences A product Idea can be turned into a large number of Product Concepts. One needs to know who is the real user. e.g. Infants, Children, Family or Adults.

4. Business Analysis
Demand Analysis Profitability Analysis Cost Analysis A. Demand Analysis Evaluate the demand in terms of Past, Current and Future trends. For the Entire industry or for a Particular company or Specific Market or Substitutes

A. Demand Analysis (cont.)
To check the durability of demand against economic factors affecting demand for a product.
B. Cost Analysis Past Current
Future
Production Cost :- Capital Equipment Plant Maintenance Cost Marketing Costs :- Distribution Costs, Packaging Costs, Advertising Costs, Field Selling Costs Overheads Costs

C. Profitability Analysis The various tools used to measure the Profitability Analysis in the industry are as under : Break Even Analysis Return On Investment Discounted Cash Flow Pay Back Period

5. Product Development
First stage in developing the product in physical / concrete form Normally involves a large investment as compared to cost in earlier stage. Steps :1. Engineering 2. Consumer Preference Testing 3. Packaging & Branding

6. Test Marketing : Objectives :1. To improve the knowledge of Potential Product Sales 2. Pre-Test alternate marketing plans
Issues : Number of Test Market Centers - It depends upon the number of alternate marketing plans company has. Selection of Cities - It should be representation of entire market. e.g. Pune, Bangalore etc. Duration of Test Marketing - up to 2 repurchases Information Collection Test Marketing Data Analysis

Without Attributes Plan 1 Plan 2 any mktg plan Product Very Good Average Average Price High Low Low Promotion High High Low Personal Selling Low High High Distribution Low High High

6. Test Marketing (cont.): Problems in Test Marketing :1. Obtaining a Set of Test Market which represents the entire market 2. Problems of translating National media into the local equivalent 3. Close follow up of Test Marketing results by Competition 4. Change of economic factors during post test marketing periods

6. Test Marketing (cont.):
Test Marketing Information Sources:1. Product Sales Data 2. Retail Audits 3. Consumer Panels 4. Buyer Surveys
Test Marketing Data Analysis :-
Trial Repurchase Actions to be Taken Rate Rate High High Commercialise Redesign Product or Advertising High Low Message Increase Advertising & Sales Low High Promotion Low Low Drop the Product

7. Product Launch :
Activities : Outline of tasks to be performed Time Schedule of all activities Budget of resources for plan & schedule
Typical Tasks : Scaling up of Production facilities Inventory build up Training of Sales Personnel Designing of Advertising Campaign Launch Conference Designing of packaging & POP materials

Sr. No. 1 2 3 4 5 Stage Idea Screening Concept Testing Product Development Test Marketing National Launch No. Pass Cost per Total Cost of Ratio Idea (Rs.) (Rs.) Ideas 64 16 8 4 2 1:4 5,000 320,000 1:2 100,000 1,600,000 1 : 2 1,000,000 8,000,000 1 : 2 5,000,000 20,000,000 1 : 2 50,000,000 100,000,000 129,920,000
Cost of finding ONE successful product from 64 Ideas


New Product Development

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NEW PRODUCT DEVELOPMENT

What is a New Product ?

Three Most Important Questions