Unit 2 New Product Development

8/8/2019 Unit 2 New Product Development

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Unit 2

NEW PRODUCT DEVELOPMENTNEW PRODUCT DEVELOPMENT


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NEW PRODUCT DEVELOPMENTNEW PRODUCT DEVELOPMENT

companies will have to be very careful andadhere to the basic concepts

Service package which includes the core service

and facilitating and supporting services new products is required for survival and better

profits

new products can be improvements and

replacements multiple products and a broader product rangehas to be understood


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New Product Development

Most new product development is an

improvement on existing products Less than 10% of new products are totally

new concepts


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Success rate of new products

The success rate of new products is very low

less than 5%. (frogs &prince)

Product obsolescence is rapid withimprovements in technology

Shorter PLCs


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NEW PRODUCT DEVELOPMENT

Idea ScreeningConcept Testing

Product Development

Test Marketing

Commercial LaunchDIVERSIFICATION

Concentric Diversification technologicallyrelated but the target customers are entirely different

Horizontal Diversification - technologicallyunrelated but the target customers are same

Conglomerate Diversification no relationshipwith the existing product


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Figure 8Figure 8--33

New Service Strategy Matrix forNew Service Strategy Matrix for

Identifying Growth OpportunitiesIdentifying Growth Opportunities

Markets

Offerings

Existing

Services

New

Services

Current Customers New Customers

SHARE BUILDING

DIVERSIFICATION

MARKET

DEVELOPMENT

SERVICE

DEVELOPMENT


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Figure 8Figure 8--22

New Service Development ProcessNew Service Development Process

Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.

Business Strategy Development or Review

New Service Strategy Development

Idea Generation

Concept Development and Evaluation

Business Analysis

Service Development and Testing

Postintroduction Evaluation

Commercialization

Market Testing

Screen ideas against new service strategy

Test concept with customers and employees

Test for profitability and feasibility

Conduct service prototype test

Test service and other marketing-mix elements

Front End

Planning

Implementation


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Brand

A name becomes a brand when consumers

associate it with a set of tangible andintangible benefits that they obtain from the

product or service

It is the sellers promise to deliver the same

bundle of benefits/services consistent


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Brand Equity

When a commodity becomes a brand, it is said

to have equity.

The premium a brand can command in themarket

The difference between the perceived value

and the intrinsic value


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Levels of meaning

Attributes

BenefitsValues

Culture

Personality

Users


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Brand Power

Customer will change brands for price

reasons

Customer is satisfied. No reason to change. Customer is satisfied and would take pains to

get the brand

Customer values the brand and sees it as afriend

Customer is devoted to the brand


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pains to get the brand


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Advantages of branding

Easy for the seller to track down problems and processorders

Provide legal protection of unique product features

Branding gives an opportunity to attract loyal andprofitable set of customers

It helps to give a product category at differentsegments, having separate bundle of benefits

It helps build corporate image It minimizes harm to company reputation if the

brand fails


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Brand strategy

Line extension existing brand name extended to newsizes in the existing product category (surf)

Brand extension (spin-off) brand name extended tonew product categories

(Maggi- noodles, soups, sauces and ketchups, andcooking aids or adidas, nike)

New brands new product in a different product

category Co brands brands bearing two or more well known

brand names (wal-mart & bharthi, car co & finance co.)


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Packaging

Includes the activities of designing and

producing the container for a productPackaging is done at three levels

- primary

- secondary- shipping


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Packaging as a marketing tool

Self service

Consumer affluence

Company and brand imageinnovation


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Designing packaging

Packaging concepts

Technical specifications

Engineering tests Visual tests

Dealer tests

Consumer tests

Packaging innovations

Environmental considerations


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PRICINGPrice is the sum value of all the values

that consumers exchange for the benefits

or having or using the product or service

Different forms - Goods bought, hirecharges, tuition fees

Dynamic Pricing - Varying prices

Flexibility


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OBJECTIVE OF PRICING

Profit

SurvivalMarket Share

Cash Flow

Status QuoProduct Quality

Communicating Image

Short term/Long term

FACTORS INFLUENCING PRICINGThe Customer's Demand Schedule

The Cost Function and

Competitors Prices


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PRICING METHODS

Mark up PricingVariable costs and contribution for fixed costsAbsorption cost Pricingmargin for profit

Target Return PricingReturn on the investment

Marginal cost PricingDirect variable costs are fully realized

Only a portion of fixed costs may realized

Perceived Value PricingBuyers perception of value

Value PricingProduct with high value at a fairly low price

Going Rate Pricing

Based on competitors prices


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PRICING METHODS (Contd..)Auction Type Pricing

English Auctions

One seller many buyer

Dutch AuctionsSealed Bid Auctions

Group Pricing.


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Pricing Strategies

Geographical pricingPrice discount and allowances

Psychological pricing

Promotional pricing

Loss-leader pricingLoss is covered by sale of other items

Special event pricing

Cash rebates

Low-interest financingLonger payment terms

Warranties and service contracts

Psychological discounting


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Pricing Strategies (Contd.)

Product-mix pricingProduct line pricing developing product line

Captive-product pricing main product at lowerprice, ancillary product at higher price

Two-part pricing split into fixed and variablecomponent

By-product pricing by-products obtained in

production of other productsProduct-bundling pricing

Market skimming pricing

Market-penetration pricing

Documents

Unit 2 New Product Development