Product and Brand

Management
Chapter One
New Product Development
 1.1. Definition of product and New Product
Definitions of product given by different scholars.
• According to Alderson, product is a bundle of
utilities consisting of various product features and
accompanying services.
• According to Stephenson, product is everything
the purchaser gets in exchange for his/her money.
• Similarly in the word of Philip Kotler, product is
anything that can be offered to satisfy a need or
want through exchange.
 1.2. Types of new product categorization
There are several accepted categories for
classifying new products within a company, these
are:
• New to the world products
• New category products
• Product line extensions
• Product improvement
• Product repositioning
• Cost reduction
 …cont

 most new product introduced to the market are not new

to the market-they are only new to the firm.
a. New to the World: The product has never been
brought to market before and the company who has
developed it essentially has a short term monopoly.
b. New category products :A new category product is
when a company diversified his product range into a
product area which it has never operated before. There is
nothing new about these types of products to the market:
they are only new to the company.
e.G Coca cola company producing snack foods (these types
of new products would be new category entry for coca
cola).
 c. Product line extension

 Product line extension is when the company introduces an

additional product which is similar to its existing range of
products.
e.g Coca cola company producing other soft drinks or water.
d. Product Improvement: is making one or more changes
to an existing product that is already in the market place.
The change may be minor or more significant and typically
involves only one or two of the product features, in an
attempt to either update the product or make it more
competitive or offer a greater array of consumer benefits.
E. Product repositioning : involves taking an existing
product in the market place and substantially changing its
image or its target market.
 …Cont

 Products retargeted to new users or new target markets:

Marlboro cigarettes were repositioned from women
cigarettes to men cigarettes.
f. Cost reductions : Cost reduction refer to new products
that simply replace existing products in the line, providing
the customer similar performance but at a lower cost. This
may be achieved by changing manufacturing or suppliers or
ingredients or components.
1.3. Organization for new product development
How new product development is managed is a critical
factor in relation to potential success or failure. There are a
number of different organizational alternatives in this
respect:
 …cont

a. New product managers are given the sole task of

developing new products. Sometimes this task is part of the
duty of a product manager or brand manager in a smaller
organization.
b. New product committees receive new product ideas from
marketing or research and development or indeed from any
other source within the organization and assess their
viability in terms of potential success.
c. New product departments exist in large innovative
companies and their work cuts across a number of
departments. When a new product idea looks to be viable
they appoint a „product (or project) champion‟ to see the
development through from its design and development to its
market launch.
 …cont

d. New product venture teams comprise people from different

parts of the organization who are brought together on an ad hoc
basis in order that different views can be incorporated in new
product decision making. Their task is to develop products
within predetermined budget and time constraint parameters.
1.4. New Product Development Process
A company has to be good at developing and managing new
products. Every product seems to go through a life cycle- it
is born, goes through several phases, and eventually dies as
newer products come along that better serve consumer
needs. This product life cycle presents one major
challenges: that is, because all products eventually decline, a
firm must be good at developing new product to replace
aging ones (the challenge of new product development).
Product life cycle
 …product life cycles
1. Introduction Stage
• This stage involves introducing a new and previously unknown
product to buyers. Sales are small, the production process is
new.
2. Growth Stage
• In this stage, sales grow rapidly. Buyers have become
acquainted with the product and are willing to buy it. New
buyers enter the market and previous buyers come back as
repeat buyers. Production may need to be ramped up quickly
and may require a large infusion of capital and expertise into
the business.
 …Product life cycle
3. Mature Stage
• In this stage, the market becomes saturated. Production has
caught up with demand and demand growth slows
precipitously. There are few first-time buyers. Most buyers are
repeat buyers. Competition becomes intense, leading to
aggressive promotional and pricing programs to capture
market share from competitors or just to maintain market
share.
4. Decline Stage
In this stage, buyers move on to other products and sales drop.
Intense rivalry exists among competitors. Profits dry up because
of narrow profit margins and declining sales. Some businesses
leave the industry. The remaining businesses try to revive
interest in the product. If they are successful, sales may begin
ton grow. If not, sales will stabilize or continue to decline.
New product development process
 …cont

• Product development (PD) is the term used to describe the

complete process of bringing a new product or service to
market.
 The new product development process consists of eight
sequential stages:
1. Idea generation
2. Idea screening
3. Concept development and testing
4. Marketing strategy
5. Business analysis
6. Product development
7. Test marketing and
8. Commercialization
 …cont

1. Idea Generation : can be defined as a systematic search for

new product ideas. A company typically has to generate
many ideas in order to find a few good ones. If you want to
find a few ideas with the power to enthrall customers, foil
competitors, and thrill investors, you must first generate
hundreds and potentially thousands of unconventional
strategic ideas.
• Major sources of new product ideas include internal
sources(such as : executives, scientists, engineers,
manufacturing staff, and sales people) and external sources
such as customers, competitors, distributors and suppliers,
and others(such as: Trade magazines ,Shows and
seminars ,Government agencies, New product consultants,
Advertising agencies ,Marketing research firms ,University
and commercial laboratory and investors.
 For better setting of new idea the company can do
any or all of the following:

• Appoint a respected senior person to be the company’s

idea manager.
• Create a cross functional idea management committee
consisting of people from R & D, engineering,
purchasing, operations, finance, sales and marketing to
meet regularly and evaluate proposed new product and
service ideas.
• Set-up a toll-free number, web site for anyone who wants
to send a new idea to the idea manager.
• Encourage all company stakeholders-employees,
suppliers, distributers, dealers-to send their ideas to the
idea manager.
 …cont

• Set-up formal recognition programs to reward those

who contribute the best ideas.
2. Idea Screening: Its purpose is to reduce the generated
ideas .This helps spot good ideas and drop poor ones as
soon as possible.
3. Concept Development and Testing: An attractive
idea must be developed into a product concept. It is
important to distinguish between a product idea, product
concept and concept testing. A product idea is an idea
for a possible product that the company can see itself
offering to the market.
• A product concept is a detailed version of the idea
stated in meaningful consumer terms.
 …cont

• Concept testing, on the other hand, calls for testing new

product concept with groups of target consumers. The
concept may be presented to consumers symbolically or
physically.
• After being exposed to the concept, consumers then may
be asked to react to it by answering questions. The
answer will help the company to decide which concept
has the strongest appeal.
4. Marketing Strategy Development : Involves designing
an initial marketing strategy for new product based on the
product concept. The marketing strategy statement consists
of three parts.
 …cont

• The first part describes the target market; the planned

product positioning; the sales, market share, and profit
goals for the first few years.
• The second part of the marketing strategy statement
outlines the product’s planned price, distribution, and
marketing budget for the first year.
• The third part of the marketing strategy statement
describes the planned long-run sales profit goals, and
marketing mix strategy.
5. Business Analysis : Evaluating the business
attractiveness of the proposal.
 …cont

• Business analysis involves a review of the sales, costs,

and profit projections for a new product to find out
whether they satisfy the company‟s objectives. If they
do, the product can move to the product development
stage.
6. Product Development : The product development
involves developing the product concept into a physical
product in order to ensure that the product ideas can turn
into a workable product by R & D or engineering.
7. Test Marketing : The stage at which the product and the
marketing program are introduced into more realistic
market settings.
 …cont

• Test marketing gives the marketer experience with

marketing the product before going to the great expense
of full introduction.
• It lets the company test the product and its entire
marketing program-positioning strategy, advertising,
distribution, pricing, branding, and packaging, and
budget levels.
8. Commercialization: If the company goes ahead with
commercialization-introducing the new product into the
market, it will face high cost. The company may have to
build or rent a manufacturing facility. It may spend millions
of dollar for advertising, sales promotion and other
marketing efforts in the first year.
 …cont

• 1.5 . Factors for successful innovation

1. Reaction of distributers. If they are not convinced of the
virtues of a new brand then they will not stock it, or
will give only minimal support (Davidson, 1987; 336).
2. Market Need.
3. Delegating the innovation to individual divisions and
departments.
• Empower groups of “dedicated fanatics”: small, self-
managed teams who will carry the project forward
regardless of the resistance they encounter.
4. support at the senior management level. Senior managers
who focus on failure are not going to encourage creative
flow.
 …cont
4. support at the senior management level. Senior managers
who focus on failure are not going to encourage creative
flow.
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