PRODUCT DEVELOPMENT
By
Prabodh
All products are mortal
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 extensions.
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 Fashion fad International markets & PLC
Product Modifications
Feature Modification
functional components retool for safety or versatility
Quality Modifications
Dependability durability
Style Modification Reposition, change Image, redesign
Aesthetic Modifications
Change the sensory appeal such as taste, texture, sound, smell, or appearance
New Product Acceptance or Rejection
New Product Importance
Company . . .
- Sales Revenue - Enhance Product mix (width-depth), replace fading stars. - Spread Risk
Societal . . . - Create jobs
- Increase standard of living - Increase competition
Risk money & time Innovate or Die .
New Product Continuum
Discontinuous Innovation -New to world products Continuous Innovation -Product improvements Same consumption pattern Caffeine . . . to Decaffeinated
-New consumption pattern (Radio to television)
New Products in a Competitive Environment
Companies Hoping to Do Well Have Little Choice but to Produce Radically Improved Products
Typewriter
PC
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 7% New Product Lines 20%
Consumer Perspective
Improvements to Existing Products 26%
Cost Reduction 11%
Criteria: Newness to the company Criteria:
New to the World 10% Additions to Existing Lines 26%
Newness to customer /humanity
1. IDEA GENERATION
THE NEW-PRODUCT PLANNING PROCESS
3. CONCEPT TESTING 4. BUSINESS ANALYSIS
2. IDEA SCREENING
5. PRODUCT DEVELOPMENT
7. COMMERCIALIZATION
6. TEST MARKETING
Idea Generation & Screening Stage
Idea Generation:
An ongoing search for product ideas to be consistent with target market needs and the organizations 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
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.
Business Analysis Stage
Specify product features, resources, and expected quantitative results in a basic marketing plan.
Product idea
Marketability - target market - logistics (distr. & suppliers) - price quality - demand & growth potential Breakeven analysis Sensitivity analysis Management Skills Investment level
Strategic Screening
Product Development Stage
Converts
R&d Value
a product idea into a physical form (prototype)
analysis of components (cost-quality-performance tradeoffs) Packaging choices Time consumption Sunk costs analysis
Ethics and New Product Development
Right to Safety
Product Obsolescence
Ethical Issues
Right to be Informed
Quality of Life and Ecology
Innovation Trap
You do not have the luxury of time to get the product right
TEST MARKETING
Not just trying something out But scientific testing
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.
M Mix outcomes Identify & correct weaknesses
When to Test?
Test Market
Advantages
Realism/actual
sales Manipulating 4ps
Disadvantages
Time pressures (Length of time) - one time purchase vs. Replacement Money Competitive reaction How Long Loss of secrecy
Should a Test Last?
Choosing a Test Market
Which test market?
External validity?
Test market population size Geographical independence (Self contained Trading area) Target audience representative ness Targeted Advertising Area (medias availability, reach area) Research tracking availability Competitive Situation
Product Testing Misconceptions
Consumers: . . . Are always rational . . . Know what they need/want . . . Can readily see your products 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
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 (4ps)
