INTRODUCTION Product development means making changes in the size, design, color, shape, characteristics, packing etc.

of the product. It may include addition of a new product line, addition of a new product item in a particular product line, elimination of existing product or product line & changes in the size, color, design, packing, characteristics, and prices of the product & discontinuation of the unprofitable item or product line. A new product is any product which is perceived by the customer as being new.

Brand rejuvenation Splendor NXG

ALTOGETHER NEW PRODUCT

REASONS FOR NEW PRODUCTS There are at least 3 reasons for which new products should be developed. 1st, new products become necessary for meeting the changes in consumer needs. 2nd, new products become necessary for making new profits. 3rd, new products become necessary for combating environmental threats.

new products become necessary for

meeting the changes in consumer needs

new products become necessary for making new profits

K series and Fabia to capture new market shares

new products become necessary for combating environmental threats

hemp clothing (soft, durable fibre that is cultivated from plants of the Cannabis genus)

hemp clothing

SAMSUNG Frost free 'Freshtech Ultima 5 Star rating reflects the highest rating in terms of energy efficiency

CATEGORIES OF NEW PRODUCTS

6 categories of new products: 1: New to the world (automated poultry equipments) 2: New to the product lines (Liril 2000 to the bathsoap category) 3: Additions to the existing product line (conditioner with soaps, detergents, shampoos etc.) 4: Improvements & revisions of existing products (cordless mouse) 5: Repositioning (Titan-from My Dads Brand to My Brand) 6: Cost reductions (Green roofs - minimize material costs - air pollution
mitigation)

FACTORS OF NEW PRODUCT DEVELOPMENT:

New product development is a continuous function of marketing management in the present day highly competitive environment. In the process of new product development, a company should keep in mind the following considerations:

Adequate market demand. The product should fit into companys present market structure. The idea should fit into the companys present production structure. The product should fit as per the financial resources available. Adequate distribution in depth & breadth.

NEW PRODUCT DEVELOPMENT PROCESS

SOURCES OF NEW IDEAS

Systematic Search for New Product Ideas Internal sources (employees)

Customers
Competitors

Distributors
Suppliers

STEP 1:IDEA GENERATION

The new product development process starts with the search for ideas. Consumers problems are the most fertile ground for the generation of new product ideas. New product ideas come from interacting with various groups & from using creativity generation techniques like BRAINSTORMING, SYNECTICS etc. BRAINSTORMING is a process, where a small group of people are encouraged to come up with their ideas on a specified problem. SYNECTICS, the real problem is kept away initially from the group & only a broader framework of the problem is given to them. The group is encouraged to think in all possible dimensions and slowly the problem will be made clear to them, & their ideas would get refined.

The purpose of screening stage is to drop poor ideas as early as possible. Thus an idea committee is formed to classify the proposed ideas into 3 categories, such as: promising, marginal & rejects. Every promising idea is kept together for rigorous screening by product evaluation committee. In screening ideas, the companies normally face 2 serious errors & they must try to avoid these mistakes as far as possible, those 2 serious errors are: DROP ERROR & GO ERROR. DROP ERROR: error which occurs when the company rejects one really good idea having potential. GO ERROR: error which occurs, when the company permits & facilitates a poor idea to move onto further development stages & commercialization.

STEP 2: IDEA SCREENING

STEP 3:CONCEPT DEVELOPMENT & TESTING

Elaborated version of a product idea expressed in meaningful consumer terms. Example: if a leading soft drink company, wants to add a new product, i.e. fruit juice to its product lines, then the following concepts can came across:

CONCEPT 1: FRUIT JUICE FOR YOUNG & GROWN UPS AS A FUNNY THIRST QUENCHING ITEM. CONCEPT 2: FRUIT JUICE FOR CHILDREN AS A HEALTH SUPPLEMENTS. CONCEPT 3: FOR ADULTS AS A NUTRITIONAL ENERGY SUPPLEMENTS.
From the above 3 concepts, the 1st one looks to be attractive & promising. After the product concept has been developed, the stage is now set for testing them. It is here the prospective consumer understand the product idea. Here whether they are receptive towards the idea & their willingness to try out such product is tested.

STEP 4: BUSINESS ANALYSIS

This stage will decide from financial as well as marketing points of view, whether the project is beneficial or not. The projects overall impact on the corporations financial position with & without the new product are estimated & compared. The management needs to prepare sales as well as cost & profit projections to determine whether they satisfy company objectives

STEP 5: PROTOTYPING & MARKET TESTING

The company will determine whether the product idea can be translated into technically & commercially feasible product. Its goal is to find a prototype that consists the key attributes described in the product concept & that performs safely under normal use & conditions and that can be produced within the budgeted cost. Here the companies conduct 2 types of major testings: ALPHA TESTING & BETA TESTING. ALPHA TESTING: testing within the firm to see its function. BETA TESTING: It includes listing a set of customers to use the prototype & give feedback.

STEP 6-TECHNOLOGICAL IMPLEMENTATION

It involves technical feasibility, search for new available technologies & its economic alternatives if available. It also includes the technological relevance of current technologies, the firms knowledge & experience of the techniques, manpower in handling those technologies etc.

STEP 7: COMMERCIALISATION
At this stage the company takes decision to go in for large scale production & marketing of the new product. Various marketing strategies are employed by the company at this stage, when it starts commercialization of a new product idea. The important factors to which strategists should focus here are: Market entry timing period. Whether to launch the product in a single locality, a region, several regions, nationally or internationally, i.e. geographic strategy. whom the new product should target i.e. targeting & segmenting.

Product Life Cycle

The Stages of the Product Life Cycle:
Development Introduction/Launch Growth Maturity Saturation Decline Withdrawal

Product Life Cycles and the Boston Matrix

Sales
Development Introduction Growth Maturity Saturation Decline

Time

Product Life Cycle stage 1 Introduction/Launch:

Advertising and promotion campaigns Target campaign at specific audience? Monitor initial sales Maximise publicity High cost/low sales Length of time type of product

Product Life Cycle stage 2

Growth:
Increased consumer awareness Sales rise Revenues increase Costs - fixed costs/variable costs, profits may be made Monitor market competitors reaction?

Product Life Cycle cycle 3

Maturity:
Sales reach peak Cost of supporting the product declines Ratio of revenue to cost high Sales growth likely to be low Market share may be high Competition likely to be greater Price elasticity of demand? Monitor market changes/amendments/new strategies?

Product Life Cycle cycle 4 Saturation: New entrants likely to mean market is flooded Necessity to develop new strategies becomes more pressing: Searching out new markets: Developing new uses Focus on adapting the product

Product Life Cycle stage 5

Decline and Withdrawal:
Product outlives/outgrows its usefulness/value Fashions change Technology changes Sales decline Cost of supporting starts to rise too far Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?

Adoption and diffusion

The Adoption Process

The decision stages that focus on internal consumer influences (psychological/social) that lead to innovation acceptance/rejection
KNOWLEDGE
TIME

PERSUASION

DECISION

CONFIRMATION

IMPLEMENTATIONS

Steps in the Adoption Process

ANALYSIS OF THE PRODUCT MEANT FOR ADOPTION

Categories of Adopters Based on Relative Times of Adoption

Product classification

Categories of Adopters Based on Relative Times of Adoption

innovators - venturesome, educated, multiple info sources, greater propensity to take risk early adopters - social leaders, popular, educated early majority - deliberate, many informal social contacts late majority - skeptical, traditional, lower socioeconomic status laggards - neighbors and friends are main info sources, fear of debt

Product quality dimensions

Product based classifications

Durable products - last for many uses and over a long period before having to be replaced.
Non-durable products - can be used once or a few times before having to be replaced. Service products - intangible products comprising activities, benefits or satisfactions that are not embodied in physical products, e.g. financial services, holidays, etc.

Durable products

Perishable goods

services

User based classifications: consumer goods/services

Convenience goods - relatively inexpensive, frequent purchases which respond to routine response buying situations.
Shopping goods - represent more of a risk and an adventure to consumers. Speciality goods - high risk, expensive and infrequently purchased products.

Unsought goods - e.g. sudden emergencies.

Convenience goods

Shopping goods

Speciality goods

UNSOUGHT PRODUCTS
FIRE INSURANCE

MEDICINES

User based classifications: B2B goods/services

Capital goods - buildings and fixed equipment that contribute to production.

Accessory goods - items that give peripheral support to the production process. Raw materials. Components parts.

Consumable Supplies

Capital goods

accessory
Car accessories Machine parts

Raw materials
Iron & steel industry raw material

Textile industry cotton yarns

Components parts

Consumable Supplies

Pricing policies

Pricing objectives
Market penetration objective Market skimming objective Target rate of return objective Price stabilization objective Meet or follow competition objective Market share objective Profit maximization objective Cash flow objective Product line promotion objective Survival objective

Pricing strategies

Geographical Pricing
Adjusting an items sale price based on the buyer's location Companies will try to gain maximum revenue in the markets in which it operates Diesel prices in different cities of India (in Rs.) Delhi- 46.95 Chennai 49.98 Kolkata 50.61 Hyderabad - 51.17 Bengaluru 51.24 Mumbai 52.45

Promotional pricing
Promotional pricing is a sales and marketing technique reducing the price of a product or service to attract customers

Discriminatory pricing

charges customers different prices for the same product or service 1. Age based pricing such as charging less for a child's ticket to a movie theatre/amusement park than an adult. 2. Universities charging more for out-of-state residents. 3. A doctor charging for services based on patients income.

Value Pricing
offering a product at a fair and reasonable price that makes sense to the purchasing customer. As the name itself suggest price of the product/ service is set according to value perceived by the customer

Captive Product Pricing

The pricing of supplies, such as razor blades, staples, computer software, or camera film, which cannot be used without a companion product

Product Bundle Pricing

combining several products and offering the bundle at a reduced price Walmarts Xbox 360 Super Elite 250GB Bundle, for example, includes an Xbox 360 console, Final Fantasy XIII, an Xbox 360 250GB hard drive, 2 Xbox 360 wireless controllers, an Xbox 360 wired headset, an Ethernet cable, a standard definition Xbox 360 composite A/V/ cable, and a Final Fantasy face plate. This package sells at a price of $399.This saves the customer roughly $35 compared to if these items were purchased individually.

Psychological Pricing
a little less than a round number, e.g. $19.99 or 2.98 or Rs.1999/- only

Product Line Pricing

a pricing strategy that uses one product with various class distinctions. Apple -6 different versions of the iPad and all with different prices. The prices - around $499 to $829

Premium Pricing
keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price A luxury flat apple products

Penetration Pricing
a relatively low initial entry price, often lower than the eventual market price, to attract new customers. The strategy works on the expectation that customers will switch to the new brand because of the lower price

Economy Pricing
A valuation technique which assigns a low price to selected products. Economy pricing is widely used in the retail food business for groceries such as canned and frozen goods sold under generic food brands where marketing and production costs have been kept to a minimum

Price Skimming
when a marketer sets a relatively high price for a product or service at first, then lowers the price over time.