Product and Brand Management

Module 3
 Topics
• New Product Planning: New Product
Development – Process and Challenges,
• New Product Launches; New Product Failure
and
• Revitalization of New Products.
 Managing Existing Products
• Product Line Extension
– Development of a product that is closely
related to existing products in the line but
meets different customer needs
• A less expensive, low-risk
alternative
• Many “new products” are really line HORLICKS
extensions.

HORLICKS
FOR
CHILDREN
 Managing Existing Products

• Product Modifications
– A change in one or more characteristics of the product
and the elimination of the original product from the
product line.
• Customers must be able to
perceive modification.
• Extend the product life cycle in
the maturity/decline stages Tide
• Fashion – fad
• International markets & PLC
Tide
with
bleach
 Product Modifications

Feature Modification Quality Modifications

Dependability
• functional components
durability
• retool for safety or versatility

Style Modification Aesthetic Modifications

•Reposition, change •Change the sensory appeal
such as taste, texture, sound,
Image, redesign smell, or appearance
 Developing New Products
New Product Examples(Feb/2002)

• Heated Coats
• Smart refrigerators
• Camera phone
• Cold Light
New Product Acceptance or Rejection
 New Product Importance
• Company . . .
- Sales Revenue • Societal . . . -
- Enhance Product Create jobs
mix (width-depth), - Increase standard
replace “fading” stars. of living
- Spread Risk - Increase
competition
• Risk money & time
• “Innovate or Die” ….

World leadership has governments subsidizing R & D

 New Product Continuum
Discontinuous Continuous
Innovation Innovation
-New to world products -Product
improvements

-New consumption Same consumption

pattern pattern
(Radio to television) Caffeine . . . to
Decaffeinated
 What is a New Product
• a product must be new or changed in
a functionally significant or substantial
respect. (6 month market introduction
time period)
• Consumer View: Anything perceived
new by the consumer
 Types of “New” Products
Management
Perspective Reposition Consumer
7% Perspective
New Product
Lines
20%

Improvements
to Existing
Products
26% Cost Reduction
11%
Criteria:
Newness to the
Criteria:
company
New to the World Newness to
10% Additions to
Existing Lines
customer
26% /humanity
 THE NEW-PRODUCT PLANNING
1. IDEA
GENERATION
PROCESS

2. IDEA 3. CONCEPT 4. BUSINESS

SCREENING TESTING ANALYSIS

5. PRODUCT
DEVELOPMENT

6. TEST
7. COMMERCIALIZATION
MARKETING
 Idea Generation & Screening Stage
Idea Generation:
• An ongoing search for product ideas to be
consistent with target market needs and the
organization’s goals
Sources of New Product Ideas
 Company: - customers, R&D,
- sales force, employees
 Channel members
 Competitors
 Government/Universities
Principle: Set the climate for innovation
 Idea Generation Techniques

• Brainstorming (1 hr. sessions, no

criticisms, think of ways to vary item)
• Word Association
• Projection
• Attribute Listing
• Forced relationships
• Surveys
• Product analysis
 R&D – The Key To Innovation
• It costs an average of $500 million to
discover & develop one new medicine.
• It takes an average of 12 to 15 years to
bring it from the laboratory to the
pharmacy shelf.
• Drug development is high risk.One in every
5,000 to 10,000 compounds screened
eventually becomes an approved drug.

PhRMA Annual Survey 1999

The Number Of Ideas Needed To Generate
One Successful New Product
1 - SCREENING AND EVALUATION
50 1978 2 - BUSINESS ANALYSIS
3 - PRODUCT DEVELOPMENT
4 - TESTING
40 5 - COMMERCIALIZATION

30
ONE SUCCESSFULL
20 NEW PRODUCT

10 1991

20 40 60 80 100
 Idea Screening: minimize risk by focusing on
ideas with the highest probability of success
Criteria: (A) relative weight x (B) rating
• Corporate personality 1………10 1 …….7
• R + D support +
• Marketing expertise +
• Financial resources +
• Production capabilities +
• Distribution support + ( A x B)
• Patentability (17 yeas)
• Cannibalism +
_________
Total score
 Concept Testing
• Describe a product idea in functional,
objective and subjective terms to create a
product concept (image).
• The product concept is presented to targeted
customers to gain their reaction(s).
• Product ideas are
accepted/rejected/modified.
• Example: Flea & Tick Spray
 Business Analysis Stage
Specify product features, resources, and expected
Id
quantitative results in a basic marketing plan.
ea
s eas
s
Id
a • Marketability -
Ide
Ide
as eas target market -
Id
logistics (distr. & suppliers) -
price – quality -
demand & growth potential
• Breakeven analysis
• Sensitivity analysis
Product idea
• Management Skills
• Investment level
Strategic Screening
 New Product Objectives
# Of mentions
Sales growth 6
Profit (absolute) 4
Profit margin 3
Payback period 3
ROI 2
Earning per share 1
Market share increase 2
Product price 2
Value added 1
No explicit objective 11
35 high technology firms (1975)
 Product Development Stage
• Converts a product idea into a physical
form (prototype)
– R&d
– Value analysis of components
(cost-quality-performance tradeoffs)
– Packaging choices
– Time consumption
– “Sunk” costs analysis
– Production run “kinks” (N= 20)
 Quality’s Lagging Role
Percentage of Companies That Consider These Criteria of
Primary Importance in Compensating Senior Managers
50
45
40
35
30 Quality
Performance
25
20 Individual
15 Performance
10
Profit
5
0
Hospitals Autos Computers Banking
 Ethics and New Product Development

Right
Right to
to Safety
Safety

Product
Product Ethical Right
Right to
to be
be
Obsolescence
Obsolescence
Issues Informed
Informed

Quality
Quality of
of Life
Life and
and Ecology
Ecology
 Innovation Trap

You do not have the luxury of time to

get the product right
TEST MARKETING
Not just trying But scientific
something testing
out

• An experimental design to test one or more

elements of the marketing mix (plan) under
realistic market conditions to measure sales,
product acceptance or profit potential.
Identify & correct
M Mix outcomes
weaknesses
 When
to Test?
Test Market
• Advantages
– Realism/actual sales
– Manipulating “4p’s”
• Disadvantages
– Time pressures (Length of time)
- one time
purchase vs. Replacement
– Money $$$
– Competitive reaction How Long
Should a
– Loss of secrecy Test Last?
 Choosing a Test Market Which test
market?

 Test market population size

*Seattle
 Geographical independence
*Chicago (Self contained Trading area)
*Los Angeles
*Dallas
 Target audience representative
ness
 Targeted Advertising Area
(media’s availability, reach area)
External  Research tracking availability
validity?
 Competitive Situation
Perception – 80 people got sick after consuming some of the
Sunlight sample
 McDonald’s to Assess Full Service Diner Concept

• Customers can order from a menu of 122 breakfast,

lunch & dinner items (eggs to chicken fried steak)
• Patrons order from phone like devices at each table
• Employees deliver the orders with a no tipping policy
• Pay after eating at front counter
• Plastic plates & utensils
• Disadvantage: twice the amount of labor required
• 60 % of business is drive through– use of table space?
• Is McD’s for eating or sleeping?
• Web site- www.goldenarchhotel.com
Product Testing Misconceptions

• Consumers:
• . . . Are always rational
• . . . Know what they need/want
• . . . Can readily see your product’s
advantages
• . . . Can assume an artificial role in testing
• . . . Can easily explain their feelings
 Projecting Test Market Results

• Consumer Surveys
• Straight Trend
Projection
• Ratio of Test Sales to
Company Sales
 Some Problems In Estimating Test Market
Sales Volume
• Over attention
• Unrealistic Store Conditions
• Reading Competitive Environment Incorrectly
• Incorrect Volume Forecasts
– Adjusted Data
– Penetration and Repeat Purchase Rate

• Time Lapse

Copyright © 2000 by Harcourt, Inc. All rights reserved.

 Control Method of Test Marketing

• Small City, reduced costs

• Increased secrecy from competitors (Low
Chance of Being Detected)
• Distribution is outsourced so regular sales
force is not distracted
• Shorter time period (speed)
 Commercialization Stage
• Offer the product with commitments of full
scale resources and effort
• Decisions:
– Timing -When? Seasonal influences?)
– Geographical strategy -Where? Weather?
– Target markets
– Marketing mix strategies (4p’s)
 Definition
• New product development (NPD) is the
complete process of bringing a new product to
the market till its consumption & feedback
from the end user of the business chain
through the systematic procedure &
parameter.
• It may be a Consumable product, service or
idea.
 Definition
• New product development (NPD) is the
complete process of bringing a new product or
service to market.
• New product development may be done to
develop an item to compete with a particular
product or may be done to improve an already
established product.
 Examples

• This type of development is considered the

preliminary step in product or service
development and involves a number of steps
that must be completed before the product
can be introduced to the market.
• Fair & lovely.
• Bajaj Pulsar.
• Samsung Mobile
 Agenda

• Market Research/Opportunity Scan

• Concept Testing
• Prototype Development
• Market Testing
• Product Launch
 Why New Products?
• New product development is essential to any
business that must keep up with market
trends and changes.
• Approximately one-third of the revenue a
business generates is coming from products
they did not sell five years ago
• Changing environment creates new demands
and needs
 Product Development
• Must be alert to quickly develop opportunities
• Focus on markets or product categories
consistent with organization’s objectives,
resources, capabilities and strengths
• Securing a competitive advantage
 New Products necessity
• A way of getting new and keeping old
customers
• Effective way of obtaining a competitive
advantage
• Source of growth and excitement
 New Product Categories
• New to the world products
• New product lines
• Product line extensions
• Improvements and revisions to existing
products
• Repositionings
• Cost reductions
 Product Development Process
Product
Launch

Test
Marketing

Prototype
Development

Concept
Testing
Market research
and
Opportunity scan
 Marketing
• Very important to product development success
• Key to successful marketing is imaginative, effective,
creative communication
• Find a need and fill it.
• Mutually beneficial exchange relationships
 Marketing Strategies
• Increase the number of customers
• Increase the average transaction
• Increase the frequency of repurchase
 Marketing Concepts
• Consumer orientation
• Customer service orientation
• Profit orientation
• Society Benefit.
 Market Research
• Who is my target audience?
• Are there enough members of this target group to
make the business worthwhile?
• How large is the potential market and how much of
that potential market can I capture?
• Who is my competition and what would make
someone choose my product over their current?
 Market Opportunity and Threats
Societal Focus Economic Realities
•GNP
•Population Shifts
•Disposable Income
•Values
•Discretionary Income
•Attitudes
•Competition
•Trends

Technological
Development
•Advance in technology Legal & Regulatory
•Market receptiveness to
technology
Condition
•Laws
•Regulations
 Market Placement
1)Identify target markets
 Size and growth potential
 Ability and ease of reaching segment
 Good fit with organizational objectives
 Greatest revenue generation with least
investment
 Market Placement
2)Determine opportunity
 Segment size
 Annual usage potential
 Anticipated annual growth rate
 Margin
 Value in use
3)Evaluate competition
 Strengths/Limitations
 Implications
 Pricing Strategies
• Goal is to achieve a target profit
• Can you hold a product’s manufacturing costs
down to less than 25% of its perceived value?
• Estimating manufacturing costs
 Obtain price quotes from several suppliers
 Concept Testing
Concept testing is the process of using
quantitative methods and qualitative methods
to evaluate consumer response to a product
idea prior to the introduction of a product to
the market.
 Concept Testing
Determine
 Critical success factors
 Financial objectives
 Marketing mix strategies
 Product, Pricing, Promotion, Placement
 Marketing plan initiatives
 Activity, Budget, Timing
 Prototype Development
• Prototype development is the process of preparing a
device, technique or system that demonstrates the
feasibility of a solution to a problem. For-
• 1) Experimentation and learning in the product
development process
• 2) Testing and proofing product concepts
• 3)Communicating concepts to the product
development team members, management and
customers.
 Test Marketing
• Test marketing is an experiment conducted in a field
laboratory ( test market) comprising of actual stores
and real-life buying situations, without the buyers
knowing they are participating in an evaluation
exercise.
• Test marketing may last from few weeks to several
months.
 Prototype and Test Marketing

 Do you prefer this product over your current

product?
 Does this product meet the need you thought it
would?
 Does the way the product works provide an
important benefit?
 Promotion and Product Launch
• Publicity
 Trade journals
 Conferences
• Personal selling
• Word of mouth
 Reasons For New Product Failures
• Poor marketing research
• Technical problems
• Insufficient marketing effort
• Bad timing
• The wrong group was targeted.
• Unrealistic forecast.
• Insufficient level of awareness.