PRODUCT DESIGN &

DEVELOPMENT

LEARNING UNIT I: PRODUCT

DEVELOPMENT FUNDAMENTALS AND
PROCESS

WEEK 3: NEW PRODUCTS

MANAGEMENT
 LEARNING UNIT I: PRODUCT DEVELOPMENT
FUNDAMENTALS AND PROCESS
Learning results:
• Analyzes, evaluates and recommends the opportunities of market that
could be turn into potential ideas for successful products launching that
allow companies to lever up their growth strategies.
Content of the session:
1.5 NEW PRODUCTS MANAGEMENT
1.5.1 Organization and Structure
1.5.2 Global Vision of the Development Process
1.5.3 Product policy and guidelines: Mission
1.5.4 Product portfolio analysis
1.5.5 Generic Company Strategies
1.5.6 Growing Strategies: New Product & New Market
Product Policy and New
Product Strategy
 POLICY and STRATEGIES

POLICY
Set of rules or criterias chosen by the top
management which forms as a base to take
day to day decisions for long term growth.

STRATEGIES
Ways chosen by senior management to
achieve objectives during the planned period.
 PRODUCT POLICY

❑ Key decision in the Commercial Planning.

❑ Impact on the rest of the Marketing Mix and affects other
functional areas in the company.
What products should we launched and marketed?
Is the market attractive enough to justify a launch?
What specific characteristics should they have?
To answer these you need to:
▪ Analyze current and potential products
▪ Evaluate market opportunities
▪ Understand company mission and characteristics
IGNITION DRIVERS FOR NEW PRODUCTS
What criteria should be follow to add a new
product in the portfolio?
Internally in the company:

❑ Financial goals
❑ Need to grow in sales
❑ Competitive position
❑ Product Lifecycle
❑ Access to Technology
❑ Strategical Synergy generation
❑ Strategical Fit with the Company
IGNITION DRIVERS FOR NEW PRODUCTS

What else should we take into account?

External to the company

❑ Emerge of Inventions
❑ Regulations
❑ Cost and availability of materials
❑ Enough size of the demand
❑ Demographic and lifestyle changes
❑ Consumer requirements
❑ Compatibility with environmental norms
 THE PRODUCT STRATEGY WILL BE
CRUCIAL IN THE FUTURE BECAUSE…

❑ Increased cost of capital

❑ Entry of new "players"

❑ More segmented markets

❑ Growth of competitive enterprises through new

products

❑ More sophisticated consumers

❑ Shortening of the product lifecycle

PRODUCT POLICY
❑ Product mix - concept to considering:
▪ Amplitude. - Mix or variety types of versions of
different product lines.
▪ Lenght.- Quality of different brands
▪ Depth. - Assortment of sizes, colors, models and
prices of each product in the line.
▪ Consistency. - Degree of relationship between one
line and another.

❑ Possible changes in the product policy:

▪ Elimination of products
▪ Product modifications
▪ Introduction of new products
 EXAMPLE OF PRODUCT PORTFOLIO:
AMPLITUDE

Detergents and Cleaning and Hair Oral Facial

softeners household Care hygiene Deodorants Fragrances creams

Skip Cif Timotei Signal Atkinson Pond’s

Axe
Skip micro Ballerina Sunsilk Signal Plus Patricks
Rexona
Surf (Luzil) Domestos Organics Close-up Otelo
Impulse
Mimosín Sedal Close-up menta
Mimosín lana Clinic Close-up fresa
Mimosín pla.fác. Clear
Ice
LENGTH /
Margarines Mayonnaise Soups creams Beverages Frozen Snacks
DEPTH
Artua Calvé Knorr Frudesa Nocilla
Bresler Lipton
Artua Oliva Hellmann’s Starlux Capitán
Magnum
Tulipan Ligeresa Salto
Cornetto
Ligeresa
Ben&Jerry
Flora
Breyers
Dorina
Frigo
Astra
La Danesa
Product Portfolio: Example
Reduced Portfolio: Unilever

Deos Hair Soaps

Axe (6,2) Sedal Shampoo(6,3) Lux (5,1)
Rexona (6,2) Sedal Cremas (6,1) Dove (3,1)
Dove Deo (1,2) Sedal Reaconditioner (6,3)
Dove Shampoo (1,2)

Notation: (Versions, forms)

Portfolio Width:
3 mains lines or categories (Deos, Hair, Soap)
Hair lines has 3 secundariy lines (Shampoo, Reaconditioner and Hair Cream).

Portfolio Lenght: Product Line Depht:

Deos: 3 brands Axe: 12 items
Hair : 2 brands Sedal: 18 items
Soap: 2 brands Total product list: 78
 WHAT ARE THE NEW PRODUCT POLICY
AND STRATEGY LOOKING FOR?

Long Term Commitments

Strategical Coherence

Actions that Capitalize the Experience

promote the
Success of new
Products of a Provide a Suitable Environment
company
 THE MISION AND VISION GUIDE THE NEW
PRODUCTS STRATEGY
The starting point for new Organizations need to
products development in a answer these questions
company are in their Mission MISSION when they define their
ad Vision. Mission and Vision

WHAT real needs or

WHAT are we WHICH is our WHAT do we do To WHOM do we satify
desires do we satisfy in their needs?
and WHY? business? and HOW? a profitable way?

VISION

WHAT do we aspire to WHICH is the milestone

WHERE do we want to of accomplishment of
be? How do we want to be in a long term?
be recognize? our succed?
 Mission

“Add vitality to life. We meet

everyday needs for nutrition,
hygiene and personal care with
brands that help people feel
good, look good and get more
out of life.”

Vision

“Make sustainable living commonplace. We believe

this is the best long-term way for our business to
grow.”
 WHAT BUSINESS ARE WE IN?

The mission indicates vectors for growth.

In which markets can we compete without lossing our positioning

FUNCTIONS
Needs TECHNOLOGIES
DESCALCIFICATION Where can we grow with
new technologies
HEALTH AND BEAUTY

GROWTH + CALCIUM
LOW FAT
NUTRITION VITAMINS AND PROTEINS
MATERNALISED
BABIES CHILDREN ADULTS ELDERS

SEGMENTS
Other markets to grow
 WHICH IS OUR BUSINESS?

PRODUCT MARKET
ORIENTATION ORIENTATION

GAS, OIL, BATTERIES, ENERGY

GASOLINE, HYDROELECTRICS

BREAD, COOKIES, SWEETS HUMAN NUTRITION

CARS TRANSPORT

PHONES COMMUNICATIONS

https://www.petroperu.com.pe/Docs/eng/files/quienes_somos/brochure-institucional.pdf
 IN WHAT BUSINESS WE ARE?

The mission indicates potencial competitors

and key factors to monitor

FUNCTIONS
Future competitors
or substitutes
TECHNOLOGIES
DESCALCIFICATION What could affect
my technology?
HEALTH AND BEAUTY

GROWTH
+ CALCIUM
LOW FAT
NUTRITION VITAMINS AND PROTEINS
MATERNALISED
BABIES CHILDREN ADULTS ELDERS

SEGMENTS
What could affect my market?
 AGAINST WHOM DO WE COMPETE IN THE MARKET?

% Market
GENERIC INDUSTRY TYPES BRANDS Share

SODAS SODAS COCA COLA 65%

BEVERAGES CITRUS PEPSI COLA 25%
TEA
FOOD WATERS ROYAL Cr 5%
COFFEE
DRESS REHIDRATS OTHER 5%
BEER
TRANSPORT OTHERS
WINE
CONSTRUCTION
JUICES
EDUCATION
LIQUORS
ENTERTAINMENT
OTHERS
OTHER
US Beverage Consumption Shares - 2017

% Stomach Share
 PORTFOLIO ANALYSIS
(BCG MATRIX)

DEVELOPED BY BOSTON CONSULTING GROUP, THIS TECHNIQUE RELATES

THE MARKET GROWTH RATES AND THE RELATIVE MARKET SHARE OF
THE STRATEGICAL BUSINESS UNITS - S.B.U. OF THE COMPANY, FOR EACH
OF THE PRODUCTS LINES.

ALL RESULTS ALLOW TO ANALYZE THE SPECTRUM OF PRODUCTS AND

CLASSIFY THEM. THIS WILL ALLOW TO KNOW WHICH ARE INTERESTING
FOR THE COMPANY AND WHICH ARE NOT.
PORTFOLIO ANALYSIS OF PRODUCTS
BCG MATRIX

+
I
N
V
E
S
T
M
E
N
T

+ -
GENERATES INCOME / LIQUIDITY
 PRODUCT LIFECYCLE AND BCG MATRIX
FOR A LEADING BRAND

?
?

Every new product born as a ?. If it is successful, it will become a Star and

when the market matures it will be Cash Cow.
If it does not lead the market, it will remain as a ? and then to become a Dog
in its mature and decline stages.
 PORTFOLIO ANALYSIS (BCG MATRIX)

Strategic MARKET SHARE

Business
Importance Market Our Main Relative
Unit
Product in sales growth product Competitor Ratio
(SBU)
.

A 20% 3% 2 60% 10% 6.0

70% 1% 1 30% 60% 0.5

B

10% 10% 3 40% 10% 4.0

C
PORTFOLIO ANALYSIS (BCG MATRIX)
Business Strategy and New Product
Development Strategies
 NEW PRODUCTS DEVELOPMENT STRATEGIES

❑ Reactive Strategies
▪ “Defensive”
▪ Imitation
▪ Second, but Better
▪ Responding
Is better for companies that:

▪ They have to focus on existing products and

markets
▪ Low protection for innovation
▪ They are in small markets
▪ They are in a channel dominated by an innovative
 NEW PRODUCTS DEVELOPMENT STRATEGIES

❑ Proactive Strategies
▪ R&D
▪ Marketing
▪ Entrepreneur
▪ Acquisitions

Companies must have:

▪ Growth policies
▪ Needs to entry with new products and markets
▪ Ability to obtain protection
▪ Time and resources to develop new products
▪ Power on Channel
▪ Difficulty of being copied
 GENERIC BUSINESS STRATEGIES (Michael Porter)

The company's competitive

strategy are the offensive or
defensive actions to create
a defendable position in an
industry or sector to
acquiring and maintaining
high profitability.
GENERIC BUSINESS STRATEGIES (M. Porter / B. Treacy)
Strategies to Develop Competitives Advantages

CUSTOMER INTIMACY
(Specialist Focus - Customer Responsive)
Best Total Solution
CONCRETE Narrow
SEGMENT Market

WHOLE INDUSTRY
PRODUCT LEADERSHIP Broad Market OPERATIONAL EXCELLENCY
(Differentation) (Cost Leadership)
Best Product Best Total Cost
 GENERIC STRATEGIES FOR COMPETITIVE
ADVANTAGES (M.Porter)

Differentiation Cost Leadership

Falling in the middle will stuck your company
Unit price
premium

Unit price

Unit price
Higher (lower)
margin Standard
Standard margin
margin Higher
Total cost per margin
unit premium Total cost
per unit
Total cost (lower)
per unit
Lowest
total cost
per unit

Standard margin < Higher margin Standard margin < Higher margin
 DIFFERENTIATION STRATEGY

CONSIST OF ADDING TO THE BASIC FUNCTION OF THE

PRODUCT, SOMETHING THAT IS PERCEIVED UNIQUE IN
THE MARKET AND DIFFERENT OF THE OFFERED BY
COMPETITORS .

RESOURCES AND SKILLS REQUIRED:

•High level of creativity and innovation

•Research and Development
•High skills in Marketing
•Many market research
•Have a recognized technological leadership
 DIFFERENTIATION STRATEGY

ORGANIZATION
•HIGH MOTIVATION IN ALL THE LEVELS
•FLEXIBILITY OF COORDINATION BETWEEN SALES, MARKETING,
R & D AND PRODUCTION
•GLOBAL INCENTIVE PROGRAMS

DIFFERENTIATION RISKS
• TOO BIG PRICE DIFFERENTIAL (BRAND LOYALTY IS LOST)
• VALUE CHANGES IN THE USER (NO NEED DIFFERENTIATED PRODUCTS)
• PURCHASING POWER LOSS IN THE CONSUMER (PRICE INCREASE)
• THE PARTIAL IMITATION OF OUR PRODUCT (ME TOO)
 COST LEADERSHIP

STRATEGY BASED MAINLY ON MORE PRODUCTIVITY,

WHAT MAKES POSSIBLE AN OFFER OF CHEAPER PRODUCTS

RESOURCES AND CAPABILITIES REQUIREMENTS:

• CONSTANT INVESTMENT OF CAPITAL

• ACCESS TO NEW CAPITAL
• VERY QUALIFIED ENGINEERING
• CONTROL OF LABOR FORCE
• STANDARIZATION,
• INDUSTRIAL DESIGN IN FUNCTION OF COST
• CHEAP DISTRIBUTION
 COST LEADERSHIP

ORGANIZATION
• NEED A RELIABLE COST SYSTEM
• SYSTEMS AND PROCEDURES MUST BE VERY REGULATED
• IMPLEMENT PRODUCTIVITY INCENTIVE

RISK OF COST LEADERSHIP

• TECHNOLOGICAL CHANGE TO DEFEAT THE CURVE OF EXPERIENCE OR
THE COSTS STRUCTURE.
• COMPETITION CAN LEARN ABOUT OUR TECHNOLOGY AND INVESTMENT
CAPACITY.
• THE MYOPIA OF COST DOES NOT SEE THE CHANGES IN THE
ENVIRONMENT.
• RAPID INFLATION OF COST
 CONCENTRATION OR SPECIALIZATION (FOCUS)

BEING THE BEST IN ATTENDING A SPECIFIC

SEGMENT EITHER BY DIFFERENTATION OR COST
LEADERSHIP.

Requires:

RESOURCES AND CAPABILITIES

• GREAT PRESTIGIOUS IN THE SECTOR
• UNIQUE AND DIFFERENTIAL SKILLS
• CUSTOMER NEARNESS
• DOMAIN OF DISTRIBUTION CHANNELS
• SOPHISTICATED MARKETING
 CONCENTRATION OR SPECIALIZATION (FOCUS)

ORGANIZATION
• HIGH MOTIVATION FOR INNOVATION
• HIGH CONCEPT AND VALUE FOR THE UNIQUENESS
• ORGANIZATIONAL FLEXIBILITY

RISKS IN THE FOCUS STRATEGY

• PENETRATION OF NEW COMPETITORS REDUCES SEGMENT
• INCREASE OF COST DIFFERENTIAL
• CRISIS IN THE SEGMENT
Competitive Strategies and Growth
Strategies
 COMPETITIVE STRATEGIES
STAND POSITION (Al Ries & Jack Trout)

• The Strategy for the

development of new products
depends in part on the
competitive position.
• Competitive Position
Attitude that a company has, to
face his competition.

1. Leader Strategy
2. Challenger Strategy
3. Follower Strategy
4. Niche Specialist Strategy
 COMPETITIVE POSITION STRATEGIES

• Leader Strategy: #1 in the market

– Generic demand expansion.

– Defense of the market share.
– Expansion of market share

Campaña Leche Gloria 3 vasos de leche al dia

https://www.youtube.com/watch?v=OY3iZ7e2O58
 COMPETITIVE POSITION STRATEGIES

• Challenger Strategy: #2 or #3 or #4
in the market

– Frontal attack to the leader

– Flank attack to the leader
– Attack other large companies
– Attack small companies

Branhma vs Backus
https://www.youtube.com/watch?v=ZQKAtvSjsnw

Laive Cero Lactosa vs Gloria Deslactosada

https://www.youtube.com/watch?v=msSdCUyEQxM
COMPETITIVE POSITION STRATEGIES

• Follower Strategy
– Imitation
– Me too

• Niche Specialist Strategy

Focus in small not attractive segments

for big players
COMMERCIAL GROWING STRATEGIES

(Cost Reductions) (New versions & Lines Extensions)

(Repositionated) (New Invention & New Line of Product)

 GROWTH STRATEGIES (Kotler)

MARKET PENETRATION
INTENSIVE
MARKET DEVELOPMENT
GROWTH
PRODUCT DEVELOPMENT

CONCENTRIC DIVERSIFICATION
DIVERSIFIED
GROWTH HORIZONTAL DIVERSIFICATION

CONGLOMERATE DIVERSIFICATION

INTEGRATED BACKWARD INTEGRATION

GROWTH
FORWARD INTEGRATION

HORIZONTAL INTEGRATION
 INTENSIVE GROWTH STRATEGIES

INCREASE MARKET SHARE

MARKET
MORE PURCHASE AND USAGE FROM USERS
PENETRATION
DEVELOP GENERIC DEMAND FROM NON USERS
CURRENT PRODUCTS
IN CURRENT MARKETS

TERRITORIAL EXPANSION
MARKET
DEVELOPMENT NEW SEGMENTS OF CUSTOMERS

CURRENT PRODUCTS NEW DISTRIBUTION CHANNELS

IN NEW MARKETS

NEW FEATURES / FUNCTIONS

PRODUCT
DEVELOPMENT EXTEND RANGE OF PRODUCTS

NEW PRODUCTS NEW GENERATION OF PRODUCTS

IN CURRENT MARKETS
 DIVERSIFIED GROWTH STRATEGIES

THROUGH: ORGANIC GROWTH, JOINT VENTURES, MERGES OR ADQUISTION/TAKE-OVERS

CONCENTRIC NEW PRODUCTS

DIVERSIFICATION NEW CUSTOMERS
WITH THE SAME INFRAESTRUCTURE

HORIZONTAL NEW PRODUCTS

DIVERSIFICATION THE SAME CUSTOMERS
DIFFERENT INFRAESTRCUTURE

CONGLOMERATE NEW PRODUCTS

DIVERSIFICATION NEW CUSTOMERS
(Highest Risk) DIFFERENT INFRAESTRUCTURE
 STRATEGICAL DECISIONS BASED
ON BCG MATRIX DIAGNOSTIC
STAR: INVEST TO GROWTH
• Integration (backwards, forward
or horizontally)
• Market penetration
• Market development
• Product development
CASH COWS: INVEST TO MANTAIN
• Market penetration
• Product development
• Expenditure cut
• Disinvestment
• Diversification
QUESTION MARK: INVEST OR SELL
• Market penetration
• Market development
• Product development
• Disinvestment
DOGS: DIVEST or INNOVATE
• Expenditure cut
• Disinvestment
• Liquidation
• Innovation and relaunch
• Diversification
Source: Fred R. David
 References
• Ulrich, K. & Eppinger, S. (2012). Chaps. 2. Development
processes and organizations. In Product Design &
Development. (pp.11-32). (5th. Ed.). Los Ángeles: McGraw
Hill Education.
• Managing Competition: The Product Strategy is Central
• Baker, M. & Hart, S. (2007). Chap. 1. Competition and product
strategy. In Product Strategy & Management. (pp. 19-33).
(2nd. Ed.). Edinburgh: Pearson Education.
• Baker, M. & Hart, S. (2007). Chap. 5. Product portfolios. In
Product Strategy & Management. (pp. 136-153) (2nd. Ed.).
Edinburgh: Pearson Education.