Lecture 6: Brand management

1.1. New product development (NPD)

In business and engineering, new product development (NPD) is
the term used to describe the complete process of bringing a new
product or service to market.
(1) Idea Generation: Ideas for new products can be obtained
from customers (employing user innovation), the company's
R&D department, competitors, focus groups, employees,
salespeople, corporate spies, trade shows, or through a
policy of Open Innovation.
(2) Idea Screening: The object is to eliminate unsound
concepts prior to devoting resources to them. The screeners
must ask at least three questions: Will the customer in the
target market benefit from the product?, Is it technically
feasible to manufacture the product?, Will the product be
profitable

when

manufactured

and

delivered

to

the

Develop

the

customer at the target price?

(3) Concept

Development

and

Testing:

marketing and engineering details and test the concept by

asking a sample of prospective customers what they think of
the idea

(4) Business Analysis: Estimate likely selling price based upon

competition and customer feedback, estimate sales volume
based upon size of market and estimate profitability and
breakeven point.
(5) Beta Testing and Market Testing: Produce a physical
prototype or mock-up. Test the product (and its packaging)
in typical usage situations. Conduct focus group customer
interviews or introduce at trade show. Make adjustments
where necessary. Produce an initial run of the product and
sell it in a test market area to determine customer
acceptance
(6) Technical Implementation: Involves managerial planning
and focusing on feedback. Make necessary adjustments to
ensure product is ready for launch.
(7) Commercialization: Launch the product. Produce and
place

advertisements

and

other

promotions.

Fill

the

distribution pipeline with product. Critical path analysis is

most useful at this stage.

1.2. Product life cycle (PLC) Course that a products sales and
profits take over its life time.

PLC stages
1. Product development
Begins when the company develops a new-product idea
Sales are zero
Investment costs are high
Profits are negative
2. Introduction
Low sales
High cost per customer

acquired

Negative profits

Innovators are targeted

Little competition

3. Growth
Rapidly rising sales

Average cost per customer

Rising profits

Early adopters are targeted

Product Offer a basic product

Price Use cost-plus basis to set
Distribution Build selective distribution
Advertising Build awareness among early
adopters and dealers/resellers
Sales Promotion Heavy expenditures to
create trial
Product Offer product extensions, service,
warranty
Price Penetration pricing
Distribution Build intensive distribution
Advertising Build awareness and interest in
the mass market
Sales Promotion Reduce expenditures to take
advantage of consumer demand

 Growing competition
4. Maturity
Sales peak
Product Diversify brand and models
Low cost per customer Price Set to match or beat competition
Distribution Build more intensive distribution
High profits
Advertising Stress brand differences and
Middle majority are targeted
benefits
Sales Promotion Increase to encourage brand
Competition begins to decline
switching

5. Decline
Declining sales
Low cost per customer
Declining profits
Laggards are targeted
Declining competition

Product Phase out weak items

Price Cut price
Distribution Use selective distribution: phase
out unprofitable outlets
Advertising Reduce to level needed to retain
hard-core loyalists
Sales Promotion Reduce to minimal level

1.3. Branding
A brand is the identity of a specific product, service, or business[1]
. A brand can take many forms, including a name, sign,

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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. A legally protected brand name is called a
trademark. The word brand has continued to evolve to encompass
identity - it affects the personality of a product, company or
service. The experiential aspect consists of the sum of all points

of contact with

the brand and is known as the

brand

experience. The psychological aspect, sometimes referred to as

the brand image, is a symbolic construct created within the
minds

of

people,

expectations

consisting

associated

with

of

all

the

product,

information

and

service

the

or

company(ies) providing them.

Benefits of global branding
In addition to taking advantage of the outstanding growth
opportunities, the following drives the increasing interest in taking
brands global:
Economies of scale (production and distribution)
Lower marketing costs
Laying the groundwork for future extensions worldwide
Maintaining consistent brand imagery
Quicker identification and integration of innovations
(discovered worldwide)
Preempting international competitors from entering domestic
markets or locking you out of other geographic markets
Increasing international media reach (especially with the
explosion of the Internet) is an enabler

Increases in international business and tourism are also

enablers