Marketing Management 11 May 2011

New Product Development

Every product goes through a lifecycle Products die because competing products create and provide better or superior value The product lifecycle presents two major challenges which companies need to overcome: New Product Development Product Life-cycle strategies Product life-cycle strategies are influenced by changing customer tastes, technology and increased competition

New Product Development Strategy A firm can either acquire new products or it can develop them itself – product acquisition or product development Companies develop new products through research and development efforts New Products are key in the market for consumers and important for companies For Consumers: new solutions and variety For Companies: key source of growth New Products fail because of various reasons: poor research, low budgets, poor designs, incorrect positioning, high pricing, wrong timing etc

New Product Development Process To successfully create new products, companies need to understand customers, markets and competitors, and should provide superior value to customers Planning and a systematic customer driven new product development process is key The Process: Idea Generation Idea Screening Concept Development Marketing Strategy Development Business Analysis Product Development Test Marketing Commercialisation

New Product Development Process

Idea Generation This is the systematic search for new product ideas Is the particular Idea worth Considering? The new product development process starts with a search for ideas. New products come from many sources whether internal or external sources External Sources: customers, scientists, competitors, channel members Internal Sources: employees, top management, research The developers of the new idea need to define the product and markets along with stating how much effort need to be devoted in developing breakthrough products, modifying existing products, and copying competitors products.

Idea Screening The purpose of Idea Screening and subsequent stages is to reduce plenty of ideas Idea Screening is the screening of new-product ideas in order to spot good ideas and drop ideas ASAP In screening ideas the company must avoid two types of errors: A Drop error where in the company dismisses an otherwise good idea and a Go error where the company permits a poor idea to move into development and commercialization. The purpose of screening is to drop poor ideas as early as possible. Real, Win, Worth it (R-W-W) Framework: Real Need – do customers need it Will We Win – competitive advantage Is it worth producing – growth and profits

Concept Development and Testing Attractive ideas must be refined into testable product concepts. Product Image: the way consumers perceive an actual or potential product Product Concept: A detailed version of the new product idea stated in meaningful consumer terms The product concept has to later on be changed to a brand concept Concept testing calls for testing product concepts with an appropriate group of target consumers, then getting those consumers reactions

Marketing Strategy Development This is the designing of an initial marketing strategy for a new product based on the product concept The marketing strategy plan consists of three parts: Target market size, structure, and behaviour, planned product positioning and sales market share and profit goals sought in the first few years form part one Second part consists of outlining the products planned price, distribution strategy and marketing budget for the first year. The third part will be the long run sales and profit goals marketing mix strategy over time

Business Analysis and Product Development After management develops the product concept and marketing strategy; it can evaluate the proposals business attractiveness Company Management needs to estimate whether sales will be high enough to yield satisfactory profit Business Analysis: A review of all financial factors for a new product to determine whether they satisfy the company’s objectives Product Development: Developing the product concept into a physical product to ensure that its transformed to an acceptable market offering Products must undergo vigorous test to qualify safety, performance and value Psychological characteristics must accompany the functional features

Test Marketing This is involves the testing of the product and the marketing program in real market settings Test marketing varies between products Costs can be high and time consuming – allows competitors time to catch up Consumer product companies have three different types of test approaches: Standard Tests Controlled Tests Simulated Tests

Commercialisation This is the process of introducing the new product into the The commercialization is one of the largest costs the company will have to face as against the costs faced till date. Also other factors the company will have to take under consideration in commercialization are timing i.e. market entry time, geographical strategy where to launch the product single locality, region, several regions, etc., target market prospects i.e. within the rollout markets, the company must target its distribution and promotion to the best prospect groups. introductory market strategy wherein the company must target its distribution and promotion to the best prospect groups.

See you next time. Cheers Guys!