03.

Concept Development & Testing

*a. Concept Development-
• Product idea can be turned into several
concepts with the help of some questions.
1. Who will use the product-infants, children,
teenagers, young or middle-aged adults or
senior citizens.
2. What primary benefit should this product
provide-taste, nutrition, refreshment, energy.
3. When will people consume this drink-
breakfast, midmorning, lunch, midafternoon,
dinner, late evening.
a. Concept Development contd.
• Concept 1- An instant breakfast drink for
adults who want a quick nutritious
breakfast without preparation.
• Concept 2-A tasty snack drink for children
to drink as a midday refreshment.
• Concept 3- A health supplement for older
adults to drink in the late evening before
they go to bed.
 b. Concept Testing-
• It involves presenting the product concept
to appropriate target consumers & getting
their reactions.
• It can be tested symbolically or physically
through Rapid Photo typing ( small
appliances/toys ) &/or Virtual Reality
( computers & sensory devices ).
• It calls for presenting consumers with an
elaborated version of the concept.
 b. Concept Testing contd.-
• Consumer responses to the following questions are
got-
i. Communicability & Believability- are the benefits
clear to you & believable.
ii. Need Level- do you see this product solving a
problem or filling a need for you?
-stronger the need, higher the expected consumer
interest.
iii. Gap Level-do other products currently meet this
need & satisfy you ? - greater the gap, higher the
expected consumer interest
 b. Concept Testing contd.-
• The need level can be multiplied by the
gap level to produce a need-gap score.

• A high need- gap score means that the

consumer sees the product as filling a
strong need that is not being satisfied by
available alternatives.
 b. Concept Testing contd.-
iv. Perceived Values- is the price reasonable in
relation to the value ?- the higher the perceived
value, the higher the expected consumer
interest.
v. Purchase Intention-would you ( definitely,
probably, probably not, definitely not ) buy the
product.
vi. User Targets, Purchase occasions &
Purchasing Frequency- who would use this
product, when & how often will it be used ?
vii. Non acceptance- what can be done to make
the product more acceptable.
 b. Concept Testing contd.-
The respondents answers indicate-
• Whether the concept has a broad & strong
consumer appeal.
• What products this new product competes
against.
• Which consumers are the best targets.
• The need –gap levels & purchase- intention
levels can be checked against norms for product
category to see whether the concept appears to
be a winner, a long shot or a loser.
 04. Marketing Strategy-
• Following a successful concept test, the
new-product manager will develop a
preliminary marketing strategy plan for
introducing the new product into the
market.

• This plan consists of three stages.

 04. Marketing Strategy contd.-
1. The first part describes the target market’s
size, structure & behavior, the planned product
positioning; & the sales, market share & profit
goals sought in the first few years.
2. The second part outlines the planned price,
distribution strategy & marketing budget for the
first year.
3. This part describes the long-run sales & profit
goals & marketing-mix strategy over time.
 05. Business Analysis-
• A. Estimating Total Sales

Total estimated sales are the sum of estimated

first-time sales, replacement sales & repeat
sales.

Sales- estimation methods depend on whether

the product is a one-time purchase, an
infrequently purchased or a frequently
purchased product.
 05. Business Analysis contd.-
• For one- time purchase products, sales
rise at the beginning, peak & later
approach decline as the number of
potential buyers is exhausted.
• Infrequently purchased products exhibit
replacement cycles dictated by physical
wearing out or by obsolescence.
• Frequently purchased products have
product life cycle sales.
 05. Business Analysis contd.-
B. Estimating Costs & Profits-
• Costs are estimated by the R & D, Manufacturing &
Finance Departments.
• One way of doing this analysis is Projected Five-Year
Cash-Flow Statement.
• Companies also use other financial measures such as
Break Even Analysis to evaluate the merit of a new
product proposal.
• The most complex method of estimating profits is Risk
Analysis.
• Here 3 estimates-optimistic, pessimistic, & most likely
are obtained for each uncertain variable affecting
profitability.
Cash-flow statement Yr 0 Yr 1 Yr 2 Yr. 3
1.Sales revenue. 000 11,889 15,381 19,654
2. Cost of Goods Sold. 000 3,981 5,150 6,581
3. Gross Margin. 000 7,908 10,231 13,073
4.Development Costs. -3,500 00 00 00
5. Marketing Costs. 00 8,000 6,460 8,255

6.Allocated Overhead. 00 1,189 1,538 1,965

7. Gross Contribution. -3,500 -1,281 2,233 2,853
8.Supplimentary Contri 00 00 00 00

9. Net Contribution. -3,500 -1,281 2,233 2,853

10.DiscountContr.15% -3,500 -1,113 1,691 1,877
06.Product Development & Testing
• At this stage the Co. will determine
whether product idea can be translated
into a technically & commercially feasible
product.
• The job of translating target customer
requirements into working prototype is
helped by a set of methods know as
quality function deployment( QFD )
 06. Prod. Devl. & Test. Contd.
• QFD takes list of desired customer
attributes ( CAs) generated by market
research & turns them into list of
engineering attributes (EAs) that the
engineers can use.
• Major contribution of QFD is that it
improves communication between
marketers, engineers & the manufacturing
people.
06. Product Development & Testing
• Testing-
• After management is satisfied with the functional
& psychological performance, the product is
ready to be dressed up with a brand name &
packaging & put into the market.
• New product is introduced into an authentic
setting to learn how large market is & how
consumers & dealers react to handling, using &
repurchasing the product.
6. Product Development & Testing
• Testing contd.-
• Amount of market testing is influenced by the
investment cost & risk on one hand& the time
pressure & research cost on the other.
• High investment-high risk products, where
the chance of failure is high, must be market
tested.
 06.Testing contd.-
• High-risk products-those that create new-product
categories or have novel features-warrant more
market testing than modified.
• Amount of market testing may be severely
reduced if Co. is under great time pressure
because season is starting or competitors are
about to launch their brands.
 07. Commercialization-
a. When (timing)-
ii. First Entry-first mover advantage.
iii. Parallel Entry-market may pay more
attention when 2 co.s advertising.
iv. Late Entry- after the competitor have
borne the cost of educating market,
faults are revealed & size is learned.
 07 Commercialization contd.-
• b. Where ( geographic strategy )-

• Co. must decide whether to launch new product in a single locality. A

region, several regions, national or international markets.
• Develop Planned Market Rollout over time.
• Co. size is important-small cos. Will select an attractive city & they will
enter other cities one at a time. Large cos. Will introduce their product
into a whole region & then move to the other region. Co’s with national
distribution networks will launch in the national markets.
• Most cos. Design new products to sell primarily in domestic markets. If it
does well, then they consider other markets.
• In choosing rollout markets, major criteria are market potential, co’s local
reputation, cost of communication media, influence of area on other
areas & competition.
 07 Commercialization contd.-
c. To Whom ( target market prospects ).-
• Target initial distribution & promotion to
the best prospect groups.
• They would be innovators, early adopters,
heavy users * opinion leaders & these
could be reached at low cost.
• Aim being to generate strong sales as
soon as possible & to attract further
prospect.
 07 Commercialization-
d. How ( introductory market strategy )-
• Co. must develop an action plan for introducing new
product into the rollout markets.
• To coordinate the many activities involved in launching
new product, mgt. can use network-planning techniques
such as Critical Path Scheduling which calls for
developing master chart showing simultaneous &
sequential activities that must take place to launch the
product.
• By estimating how much time each activity takes,
completion time of the entire project can be estimated.
• If launch must be completed earlier then reduce time
along the critical path.