NEW PRODUCT DEVELOPMENT
New product development (NPD) is the term used to describe the complete process of bringing a new product or service to market.
There are two parallel paths involved in the NPD process:
One involves the idea generation, product design and detail engineering;
Other involves market research and marketing analysis.
Bothe the two paths are used to either evolve totally new product for the consumers or for modifying and improving the existing product.
Companies typically see new product development as the first stage in generating and commercializing new products within the overall strategic process of product life cycle management used to maintain or grow their market share.
SIGNIFICANCE OF THE NEW PRODUCT:
Now a question arises; what is the need of a new product?
- Meeting the changes in the consumers’ needs and demands.
- Making new profit and new markets.
- Combating Environmental threats.
CLASSIFICATION OF NEW PRODUCT:
New product is classified on the following to bases.
- New product arising out of the technological innovation.
- New product arising out of marketing oriented modification.
TYPES OF NE PRODUCTS/ INNOVATION
On the basis of the above classification, there are following three types of new product
- DISCONTINUOUS INNOVATION
o Totally New product & concept
o Eg. Launch of Refrigerator for the very first time.
o Eg. Martin cooper innovated mobile.
- CONTINUOUS INNOVATION
o Continuous modification in the existing product
o Eg. Different models in mobile phone. Nokia, NOKIA N SERIES, NOKIA E SERIES, NOKIA 3G. etc.
- DYNAMICALLY CONTINUOUS INOVATION
o Without changing the existing product, introducing the new concept in similar product line
o Eg. Floppy – CD – rewritable CD – DVD – Blue Ray DVD.
o Eg. Computer – Laptop – Notebook – Palmtop – Ipad.
ADOPTION PROCESS OF INNOVATION
Adoption deals with how individual adopts the new product.
- AWARENES – getting aware about the product
- COMPREHENSSION – collection of information
- ATTITUDE – attitude towards the product; whether the product is attractive or not
- LEGIMITATION – desire to purchase
- TRIAL – testing the product
- ADOPTION – adopting the product
OR
AIDA: ATTENTION – INTEREST – DESIRE – ACTION
DIFFUSION PROCESS OF INNOVATION
Diffusion deals with adoption of the product in the market by entre community of the consumers.
Following are the different stages in the process of diffusion
- INNOVATORS – they are the innovation adopters.
- EARLY ADOPTERS – after innovators early adopters come into market
- EARLY MAJORITY – they are the people who accept the product in the initial stage
- LATE MAJORITY – after the product gets all the success late majority joins the group to purchase the product
- LAGGARDS – they are the people who join the group at last and leave it at first in the decline stage.
STAGES IN NEW PRODUCT DEVELOPMENT
- IDEA GENERATION
- IDEA SCREENING
o Need
o Improvement in existing product
o Current business or new business line?
o If it’s existing product, then what is the situation of the competitors?
- CONCEPT TESTING
o Whether the perspective consumers understand the idea
o Whether they are receptive towards the idea
o Whether they actually need such product
o Whether they will try for such product
- BUSINESS / MARKET ANALYSIS
o Which market is suitable
o Whether the market is suitable for the product.
o Whether there is any competition in market.
- ESTIMATING THE DEMAND FOR NEW PRODUCT
- ACTUAL DEVELOPEMNT OF THE PRODUCT
- MARKET TEST
- COMMERSIALISATION
- PRICING STRATEGIES
- LAUNCH OF THE NEW PRODUCT
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BRANDING
BRAND:
A brand is the identity of a specific product, service, or business. A brand can take many forms, including a name, sign, symbol, color combination or slogan. The word brand began simply as a way to tell one person's cattle from another by means of a hot iron stamp.
Definition:
“Brand is an identifying symbol, words, or mark that distinguishes a product or company from its competitors. Usually brands are registered (trademarked) with a regulatory authority and so cannot be used freely by other parties . For many products & companies, is an essential part of marketing ."
BRAND EQUITY:
Brand equity refers to the marketing effects or outcomes that accrue to a product with its brand name compared with those that would accrue if the same product did not have the brand name.
Keller, Kevin Lane (2003)
In simple words__
Brand Equity refers to the image of the brand in the mind of the customer.
Brand Equity has three components_
- BRAND AWARENESS: It can be measured according to the recognition & recall of the brand
- PERCEIVED QUALITY: lies at the heart of what consumers are buying
- BRAND LOYALTY: how much loyal the consumer is towards the Brand
IMPORATNCE / SIGNIFICANCE OF BRANDING:
- INDICATING THE ATTRIBUTES: A brand name is the indicator of the attributes of the product. Like AXE DEO is a deodorant for men and we know the usage of it.
- INITIATE THE COMMUNICATION: Now how you would like to initiate a dialogue with me definitely by calling me by name so my name becomes a factor, which helps to initiate communication. As earlier we used to say give me soap now we go and ask for a particular brand of soap. So we see that the name enables consumer or provides basic means to ask for a specific soap.
- ATTRACTING THE CUSTOMERS: It helps you to break the initial barrier or to say in other way it helps you to incite or attract a customer towards your product. Now as marketing is becoming tougher a well fitting name for the product can create an initial urge in consumer to use that product. Now when Hero Honda names its new bike PASSION, they want to attract the youth who is passionate about the possession of the bike. The name kindles their desire to go to the Hero Honda showroom.
- CREATING AWARENESS: A name, which fits properly with the culture of the society, gains a lot more awareness. NISSAN manufactured DATSON which in Japanese meant "to lose money" so to avoid any sort of trouble they changed to DATSUN in other case Coco Cola, which is world famous brand name but it doesn't have a favorable position in Arabs as the calligraphy of Coco Cola appears anti Mohammedan.
- RECALL THE PRODUCT: A good name will also help in brand recall provided the product is satisfying the consumer. Like Volkswagen used to name its cars like Beetle and Rabbit it allowed consumer to remember the name and associate it to the product. Other example can be YAHOO! the name is so catchy that a person doesn't need to think about it but it creates its own position in the mind.
- ENTRANCE TO THE NEW PRODUCT LINE: Helps you to enter in new product line with relatively lesser competition. This use of brand name is quite common and can prove to be really useful if brand name is being extended in properly selected category. We have a really good example of Reliance, which has proper extended its name in to diverse fields. You can find reliance petrol pumps, reliance web world. Similarly we have L.G.,which is trying to enter into FMCG market. Its very interesting point to notice L.G is a well established in Korea in FMCG category.
- HELPS TO SURVIVE IN MARKET COMPETITON: A well-established brand name also helps in combating an initial attack from a new product launched by the competitor.
- HELPS TO GENERATE THE BRAND EQUITY: Help in building internal equity in the organization as well as shareholders equity.
BRANDING STRATEGIES:
1. BRAND EXTENSION:
Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category. The new product is called a spin-off.
Eg: Dove Soap, Dove Shampoo, Dove Hair Conditioner (DOVE)
2. LINE EXTENSION:
Adding of another variety of a product to an already established brand line of products.
Eg. : COKE – DIET COKE – COOKE LIGHT – ZERO COKE (COLD DRINK LINE)
SUNSILK SHAMPOO variety of shampoo is there for regular hair, for dry hair, for damaged hair, for split hair.
3. MULTIBRANDS:
Multiple brands under one company.
Eg: HUL Has LUX, LIRIL, DOVE.
ITC has BINGO, SUNFEAST, JOHN PLAYER, etc.
COKE – THUMOS UP – LIMCA – FANTA – SPRITE – MINUTE MAID etc.
4. UMBRELLA BRANDING:
The head brand. The company is itself known as a Brand
TATA, RELIANCE, ADITYA BIRLA GROUP, ITC, etc.
BRANDING: TYPES / DECISIONS:
Based on the above mentioned Strategies, there are following types/ decisions related to branding
- Individual Brand:
o Lux, Liril, Cinthol, Coke, Parle G etc.
As individual brands
- Blanket Family Brand: (Umbrella Branding)
o Eg. Tata, Reliance etc
- Separate Family Brand:
o Eg. coke has Thumps Up, Coke, Limca, Sprite, Fanta
o Eg. HUL has Lux, Liril, Dove
o Eg. ITC has Bingo, Sunfeast, Wills Lifestyle, John Player etc.
- Company and Individual Name combined Branding
o Tata Sumo, Toyota Innova, Himani Fast Relief etc.
VALUE FOCUS APPROACH TO BRANDING
• Choose the Value
– Understand the desires
– Select the target
– Define benefits & Price
• Provide the Value
– Product Development
– Manufacture
– Service
– Price
• Communicate the value
– Sales Messages
– Advertising / promotion
PACAKGING & LABELLING
PACKAGING
Packaging is the science, art, and technology of enclosing or protecting products for distribution, storage, sale, and use. Packaging also refers to the process of design, evaluation, and production of packages. Packaging can be described as a coordinated system of preparing goods for transport, warehousing, logistics, sale, and end use. Packaging contains, protects, preserves, transports, informs, and sells. In many countries it is fully integrated into government, business, institutional, industrial, and personal use.
FUNCTIONS OF PACKAGING:
- Protection
- Easy Identification
- Convenience
- Promotion
- Containment
- Quality Control
- Transportation
TYPES OF PACKAGING:
- CONSUMER PACKAGING
o Bottle
§ Glass Bottle
§ Pet Bottle
o Plastic
o Bags
o Tin
o Tetrapak
o Polythin
- INDUSTRIAL PACKAGING
o Carton Box (Basically used for transportation purpose)
NEW TRENDS IN PACKAGING
- Plastic bottle Packaging
- Pet bottle Packaging
- Tetrapak
- No more Plastic
- Eco-friendly packaging (Recyclable Packaging)
- Cardboard Containers
LABELLING
Labelling is any written, electronic, or graphic communications on the packaging or on a separate but associated label.
PURPOSE / FUNCTIONS OF LABELLING
- Brand Identification
- Product Description
- Product Grading / Categorizing
- Product Promotion
LABELLING DECISIONS
- Key features and benefits
- Text design and Graphics
- Clear identification of Weight & Measure
- Instructions for Users
- Warning (Safety Hazards)
- Context Declaration
- Nutritional Content for food products & medicines
- Information about expiry
- Price of the Product
- Branding
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PORTFOLIO ANALYSIS
Product portfolio analysis a strategic planning tool that takes a product's market growth rate and its relative market share into consideration in determining a marketing strategy
Market share plays a central role in the portfolio planning. The Portfolio Analysis an exposition of the underlying relationship between market share, market size, market growth rate, product sales volume and product sales growth rate.
There are three constructs-the market share, the physical volume, and the Rupee volume -which aid in the strategic analysis of the product portfolio.
The Market Share deals with the actual market share of the product. In simple words, how much market the product has captured if it is compared with the competitors market share of the same product.
Eg. If we take the example of GSM Mobile services following companies are having this kind of position in terms of Market Share
- Bharti Airtel 35%
- Vodafone 24%
- BSNL 16%
- IDEA 15%
- Aircel 6%
- Reliance Telecom 4%
The Physical Volume deals with no. of units of the product sold in the market
If we continue with the same example, the number of customers the mobile companies have will be product’s physical volume in terms of GSM
- Bharti Airtel has 155382758 customers
- Vodafone has 86340024 customers
- BSNL has 42673357 customers
- IDEA has 40016153 customers
- Aircel has 16761397 customers
- Reliance Telecom has 10853841 customers
The Rupee Volume deals with the profit earned by the product.
There are several models for the Product Portfolio Analysis. But the most used and reliable model is BCG Matrix
BCG MATRIX
The BCG matrix or also called BCG model relates to marketing. The BCG model is a well-known portfolio management tool used in product life cycle theory. BCG matrix is often used to prioritize which products within company product mix get more funding and attention.
The BCG matrix model is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970's.
The BCG model is based on classification of products (and implicitly also company business units) into four categories based on combinations of market growth and market share relative to the largest competitor.
What is the BCG matrix and how does the BCG model work?
Placing products in the BCG matrix results in 4 categories in a portfolio of a company:
BCG STARS (high growth, high market share)
- Stars are defined by having high market share in a growing market.
- Stars are the leaders in the business but still need a lot of support for promotion a placement.
- If market share is kept, Stars are likely to grow into cash cows.
BCG QUESTION MARKS (high growth, low market share)
- These products are in growing markets but have low market share.
- Question marks are essentially new products where buyers have yet to discover them.
- The marketing strategy is to get markets to adopt these products.
- Question marks have high demands and low returns due to low market share.
- These products need to increase their market share quickly or they become dogs.
- The best way to handle Question marks is to either invest heavily in them to gain market share or to sell them.
BCG CASH COWS (low growth, high market share)
- Cash cows are in a position of high market share in a mature market.
- If competitive advantage has been achieved, cash cows have high profit margins and generate a lot of cash flow.
- Because of the low growth, promotion and placement investments are low.
- Investments into supporting infrastructure can improve efficiency and increase cash flow more.
- Cash cows are the products that businesses strive for.
BCG DOGS (low growth, low market share)
- Dogs are in low growth markets and have low market share.
- Dogs should be avoided and minimized.
- Expensive turn-around plans usually do not help.
Prof. A. R. Sayyed
