An introduction to New Product Development (NPD)

New products Development: Product Strategy

New Product Development- Managing Innovation within firms

Learning Objectives
Recognize that new products serve a variety of purposes depending on what is seen to be strategic imperative Examine the concept of platforms in new product development Assess the importance of brand strategy in product development Explain how differentiation and positioning contribute to a products success in the market place Recognize the importance of marketing research in the effective development of new products

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Product Development Opportunities

New product platforms
Involves major development effort to create a new family of products based on new common platform e.g. Digital photography

Derivatives of existing platforms

Develop existing platform usually to ensure existing products are updated e.g. Honda develop small petrol engines and apply this technology to various application such as lawn mower and motorcycles

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Product Development Opportunities

Incremental improvements to existing products
Involve adding or modifying features of existing products to keep the product line Keep product updated and competitive e.g. Packaging or changing design

Fundamentally new products

Taking product to new and unfamiliar markets More risky but may help to secure long term future of the firm e.g. Breathable fabric

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Product Strategy
Competitive Strategy Short Term(tactic)
Filling out product lines with different product sizes or added features to deter entrant to market Minor product changes can be employed to secure distributors' loyalty rather than stocking rival offerings Unlikely to employ full NPD process Limited research or market testing Limited to determining acceptable price levels or alternative advertising messages

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Product Strategy
Competitive Strategy Long Term
Seek more profound contribution from new products New product categories to be develop within the same, related, or new technology areas Seek new customer segments or traditional customer base Radical product development through marketing, technical research, development and testing

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Product Strategy
Product Portfolios
Analyzing the organizations total collection as a portfolio Share growth matrix or Boston Matrix Clustering of the portfolio in one quadrant (e.g. high share/high growth) can be viewed as unhealthy. Different portfolio models: To give the strategist an overview that could reveal current or potential problems or opportunities in product strategy

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The Competitive Environment

Speculation of the external environment deals with the following issues:
1. Estimates would be needed about what would be change 2. How the industry competitive structure may alter 3. How regulatory framework may evolve 4. Customer needs may be a further area in which to speculate

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Differentiation and Positioning

Differentiation
Value for money proposition Based upon superior quality Superior quality Better materials Better performance New features Availability of better service
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Product Differentiation
Levitts idea
The core product- comprise the essential basics needed to compete in a product market The expected product- adds in what customers have become accustomed to as normal in the product market The augmented product- offers features, services or benefits that go beyond normal expectations The potential product- would include all the features and services that could be envisaged as beneficial to customer

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Product Positioning
Refers to the perceptions customers have about the product e.g. Innovative, functional, old fashioned, exclusive, frivolous, fun Selecting an appropriate positioning can make a difference to success or failures It determines what the organization tells the market about the product Who it tells and how it tells E.g. P&G position 2 identical product very differently. Sure target at young males 18 to 25 and Secret target young females 12 to 24.
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Examples of Product Positioning Strategy

1. Pricing Examples

2. Quality examples
3. Service examples 4. Distribution examples 5. Packaging examples
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Product Positioning
Positioning studies
1. Begin with determining a relevant set of products 2. The criterion for inclusion on how they may be perceived by customer to be choice alternatives 3. A list of determinant attributes is generated 4. Identify the list of attributes that are salient in discrimination among the alternatives
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Product Strategies
Product Strategy Product Proliferation Value Design Firm Honda How On entering the European motorcycle market Honda offered an enormously wide range of engine sizes Offer a high quality product with emphasis on reliability Emphasize good design in all of their products, frequently pioneering unique styles and offering elegance and easy to use products Develop reputations for product innovation with strong technology culture Forefront of service development and pioneering many service offerings
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Toyota Sony/ Apple

Innovation Service

3M American Express

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Product Performance Factors

Performance in operation Reliability Sale price Efficient delivery Technical sophistication Quality of after sales service Durability Ease of use Safety in use
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Ease of maintenance Parts availability and cost Attractive appearance/shape Flexibility and adaptability in use Advertising and promotion Operator comfort Design

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Brand Extension
The use of an established brand name on a new product in the same product field or in a related field Take advantage of carry over effects from the original brand Pool of goodwill among consumers and distributors E.g. Unconventional size e.g. Giant, Jumbo, Fun

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Brand Extension
Carry Over Effect
1. Expertise- Original product had established and maintained itself, the product is like to have accrued a reputation for high level competence in its field. Users therefore feel comfortable and assured in making repeat buys Prestige- Some customers envisage certain images and confer status on the use of them. Brands benefit from particular kinds of associations and symbolism which they have become Access- Well established original product have access to the best suppliers and distributors. Extension would capitalize these relationship to its initial launch
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2.

3.

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What is Market Entry?

Activities related with the bringing a product or services to a target market. During the planning stage, a company will consider ;
The barriers to enter the market The cost of marketing Sales & delivery Expected outcomes of entering the market.
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Failure to Market Entry

Lack of products meeting the local

demand & needs

Failure to differentiate from existing retailers. Lack of market research.

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Market Entry
Entry Timing- Pioneer or First mover advantage

Pioneers can set the standards, establish a distinctive quality position, take the lead in the continuing evolution of technology, and gain valuable experience in manufacturing and distribution(buzzell and Gale, 1987) A weak, tentative first mover, without the motivation or resources to grow the market, can spend years making losses only to be superseded by a stronger follower.(green et al 1995)

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Launch and Continuing Improvement

1. Product platform evolution and brand extensions What is the next generation of the product? Can the basic product platform be enhanced and should this lead to brand extension? 2. Market evolution Will there be a lengthy introductory period before any rapid growth? Will new market segment become apparent or can they be created? What is the geographic scope be widened? 3. Competitive Evolution How soon will competitors arrive? How Predictable is their entry? What distinction ect

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Withdrawing Products
Chronic poor sales performance is a good indicator of withdrawing products Investigation should focus on how organization managed its efforts Exit cost would feature strongly e.g. Contract with suppliers/distributors/lease Consider active commitment to stay in declining industry in anticipation of increasing market share
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Tutorial
Would you agree that product portfolio analysis is too simplistic to be of much value?

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