Developing new products and managing product life cycle New product Development strategy New product can be obtained in two ways. One is through acquisition- by buying a whole company, a patent or a license to produce someone product; other is through New product Development process. It means the development of original products, product improvements, product modifications, and a new brands that a firm develops through its own R&D efforts. New product brings new solutions and variety to the customers life and for companies, new products are key source of growth..
New products revive new ways to connect with customers as they adapt their buying to changing economic times. The reasons behind some new product failure are pretty obvious. Some products fail because they don’t bring value to customers while some attach trusted brand name to something totally out of character. For instance, cake decorating kits, perfumes and after shaves from motorcycle company Harley Davidson. New product Development process To create new products, a company must understand its consumers, markets and competitors and develop products that deliver superior value to customers.
There are 8 main major steps in this process. . Idea generation Idea generation is the systematic search for new product ideas. Major sources of new product ideas include internal and external sources. Internal Idea sources Using internal sources, a Corcoran can find new ideas through formal R. Not only R but companies can pick the ideas of its employees- from executives to scientists, engineers, manufacturing staff and also salespeople. Many companies have also developed successful ‘entrepreneurial’ programmer that encourage employees to develop new ideas.
For example, Internet networking company Cisco makes everybody’s business to come up tit ideas by setting up an internal wick zone through which any Cisco employee can propose an idea, comment or modify someone else’s proposal. External Idea Sources Companies can obtain good new product ideas from any external sources like customers, competitors, distributors, suppliers and others. Distributors are close to the market and can pass along information about consumer problems and new product possibilities Suppliers can tell the company about new concepts, techniques and materials that can be used to develop new products.
Companies can watch competitors ads to get clues about their new rodents or buy competitors new product and take it apart to see how they work, analyze their sales. Other idea sources include trade magazines, shows and seminars, government agencies, advertising agencies, market research firms, inventors and more. But the most important source of new product idea is the customers themselves. Company can analyze customer questions and complaints to find new products that solve consumers problems. Or company can even invite customers to share suggestions and idea.
For example Struck sponsors My Struck Idea, invites customers to share, issues and vote on new product and service ideas. Scrounging More broadly, many companies are now developing scrounging or open- innovation new product idea programmer. Scrounging means Inviting broad communities of people- customers, employees, independent scientists and researchers and even the public at large-?into the new product innovation process. For example, Dell’s Disasters website asks consumers or anyone else for insights on how to improve the company’s product offering. 2.
Idea Screening The purpose of idea generation is to create large number of ideas and next step is to reduce the number of ideas. Firs idea reducing stage is idea screening, which helps spot good ideas and drop poor ones as soon as possible. A company should be able to answer all three R-W-W (real, win, worth doing) product screening framework questions: Is it real? Is there a real need and desire for particular product and will customers buy it? Is there a clear product concept and will such a product satisfy the market? Can we win? Does a particular product offer a sustainable competitive advantage?
Does company have resources to make such product a success. Is it worth doing? Does it offer sufficient profit potential? Does it fit company s overall growth strategy? 3. Concept Development and testing An attractive idea must be developed into a product concept. It is important to distinguish between a product idea, a product concept and a product image. Product idea is an idea for a possible product that the company can see itself offering to the market. Product concept is a detailed version of the idea stated in meaningful consumer terms.
Product image is the way consumers perceive an actual or potential product. Concept Development No explanation in book or slide, only example given. See page 279 Concept testing Concept testing refers to testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal. Many firms test new product concepts with consumers before attempting to turn them into actual market products. For some concept tests, a word or picture description might be sufficient. But more concrete and physical presentation of the concept will increase the reliability of the concept test. . Marketing strategy development The next step is marketing strategy development. Marketing strategy development involves designing an initial marketing strategy for a new reduce based on the product concept. Marketing strategy statement consists of three parts. The first part describes the target market’ the planned value proposition; and the sale; market share and profit goals for the first new year. The second part of the marketing strategy statement outlines the product’s planned price, distribution and marketing budget for the first year.
Third part of the marketing strategy statement describes the planned long-term sales, profit goals and marketing mix strategy. 5. Business Analysis Business analysis involves a review of the sales, costs and profit projections to mind out whether they satisfy the company’s objectives. If they do then the product can move to the next stage. To estimate sales, the company might look at the sales history of similar products and conduct market surveys, and can estimate minimum and maximum sales to assess the range of risk. 6.
Product Development Here, R&D or engineering develops the product concept into a physical product. It will show if a product Can be turned into a workable product. This requires an increase in investment and also shows whether the product idea can be turned into a workable product or not. Here a prototype is developed tit a hope of meeting customer’s satisfaction and excitement. 7. Test marketing It is the stage at which the product and marketing program are introduced into more realistic marketing settings. There are three types of marketing test.
Standard test markets It gives marketer experience with marketing a product before going to the great expense of full introduction, it lets a company test a product and its entire marketing programmer- TA erecting and positioning strategy, advertising, distribution, pricing, branding and packaging and budget levels. But the costs can be high. When the costs of developing and introducing new product is owe and the management is confident about a new product then only it can be done. Controlled test markets New products and tactics are tested among controlled groups of customers and stores.
In each market, market research agency can be used to measure purchases by a panel of shoppers who report all of their purchases in participating stores. Within test stores, the agency can control such factors as shelf placement, price and in store promotions for products being tested. Simulated test markets Here, researchers measure consumer responses to new products and marketing tactics in laboratory stores or simulated shopping environments. Many marketers are now using online simulated test markets to reduce the costs of test marketing.
Advantages of simulated test markets – Less expensive than other test methods – Faster – Restricts access by competitors. Disadvantages – Not considered as reliable and accurate due to the controlled setting. 8. Commercialism’s Commercialism’s is the introduction of new product into the market. The company launching a new product must first decide on introduction timing (when to launch). Next, it must decide where to launch the new product- in a single location, a region, the national market, or the international market.
Some confident companies having enough capital develop planned market rollers over time. Managing New Product Development Companies must take holistic approach to managing the process show in figure 9. 1 . Successful new product development requires a customer centered, team based and systematic effort. Customer centered new product development This focuses on finding new ways to solve customer problems and create more customer satisfying experiences. Today, innovative companies get out of the research laboratory and mingle with the customers in the search for new customer value.
Customer involvement has a positive effect on the new product development process and product success. Customer-centered new product development begins and ends with understanding customers and involving them in the process. Sequential Product development Under this, the company departments work closely together individually to complete each stage of the process before passing it along to the next department or stage. This step by step process can help bring control to complex and risky projects but it can also be dangerously slow, which can result in product failure in fast-changing, highly competitive markets.
So team based new product development process can be solution for this. New product team based development As mentioned earlier, this is a better substitute to sequential product development. In this approach various company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness. Instead of passing new product from department to department, the company assembles a team of people from various departments that stays with the new product from start to finish.
Such teams usually include people from the marketing, finance, design, manufacturing and legal departments and even supplier and customer companies. Team based approach have some limitations. For example it creates more organizational tension and confusion than orderly sequential approach. Systematic new product Development This is an innovative development approach that collects, reviews, evaluates and manages new product ideas. This creates an innovation-oriented culture. It shows that the top management supports, encourages and rewards innovation.
It also yields a large number of new product ideas. It makes the good new ideas developed and resulting in producing more new product sessions systematically. Thus, this requires a new holistic approach for finding new Ways to create valued customer experiences from generating and screening new product ideas to creating and rolling out want satisfying products to customers. Product life cycle strategies Product life cycle is the course of a product’s sales and profits over its lifetime. Product life cycle has five stages and they are: a.
Product development begins when the company finds and develops a new product idea. At this stage, sales are zero and company’s investment mount. B. Introduction is a periods of low sales growth as a product is introduced in the market. Because of the heavy expenses Of the product introduction, profits are non-existent. C. Growth is a period of rapid market acceptance and increasing profits. D. Maturity is a period of slowdown in sale growth. Profit level decreases or declines in this stage. E. Decline is the periods when the sales fall off and profits drop.
Not all products follow all five stages of PL. The PL concept also can be applied to what are known as styles, fashions and fads. A style is a basic and distinctive mode of expressions. Once style is invented, it may last for generations passing in and out of vogue. A fashion is a currently accepted or a popular style in a given field. They tend to grow slowly, remain popular for a while, and then decline slowly. Egg formal business look of 1 sass and causal business look of 2000. Fads are temporary periods of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity.
Example floppy birds. Introduction stage This stage starts when a new product is first launched. This is a stage in which new product is first distributed and made available for purchase. In this stage s compared to other staged profits are negative or low because of low sales and high distribution and promotion expenses. Much money is needed to attract distributors and build their stocks, promotion sending is high to inform customers of a new product. Growth stage This is the PL stage in which a product’s sales Start climbing quickly.
Fifth new product satisfies a market, it will enter a growth stage in which sale will start climbing quickly. New competitors will enter a market because they get attracted by the opportunities of the profit. Increase in competitors leads to increase in the number of distribution outlets. Profits increase during the growth stage as promotion costs are spread over a large volume and as unit manufacturing costs decrease. Maturity Stage This is the PL stage in which a product’s sales growth slows or levels off. Slowdown in sales growth results in many produces with many products to sell.
Overcapacity leads to greater competition. Competitors begin marking down process, increasing their advertising and sale promotions. These steps lead to drop in profit. Product manager should do more than simply ride along or defend their product but they also should consider modifying the market. In modifying the market, company tries to increase consumption by finding new users and new market segments for its brand, Company also could try modifying a product, changing characteristics such as quality, features, style or packaging to attract new users and inspire more usage.
Example Heinz tomato ketchup which has marketed the product such as: Tomato ketchup with balsamic vinegar, tomato ketchup organic, ketchup with reduced sugar and salt etc. Or marketers can even try modifying the marketing mix by improving sales but changing one or more marketing mix elements. They can offer new improved services to buyers. Decline stage This is the PL stage where the products sales decline. Sales decline for many reasons, including technological advances, shifts in consumer tastes and increased competition.
Companies need to pay more attention to their aging products, Firms first task is to identify those products in the decline stage by regularly reviewing sales, market shares, costs and profit trends. Management may decide to maintain its brand by repositioning it in hopes of moving it back to growth stage. Management may decide to harvest a product, which means reducing various costs (plant and equipment, maintenance, R, advertising) hoping the sales hold up. If successful then it will increase the profits in short term.
Finally, they can decide to drop a product from its like, It can sell It to another firm or simply liquidate it at salvage value. SEE PAGE 291 table 9. 2 for summary of PL characteristics, objectives and strategies Additional Product and service considerations Product decisions and social responsibility Marketers should consider public policy issues and regulations regarding acquiring or dropping products, patent protection, product quality and safety and product warranties.
International product and services marketing International product and services face special challenges; They must work out what products and services to introduce and in which countries. As the consumers and markets around the world differ widely, companies must usually respond to these differences by adapting their product offerings. For instance, Nestle Kitty in Japan offers the chocolate in green tea flavor. Packaging also presents new challenges for international marketers. For example names, labels and colors may not translate easily form one country to another. Markets should keep customs, values and laws in their minds.