NEW PRODUCT PLANNING & DEVELOPMENT

PLANNING & DEVELOPMENT

ISSUES IN NEW PRODUCT

How are new products developed?

Through acquisition Through development

Buy other companies

Buy a license or Acquire franchisee patents from other from other companies companies

Develop new product in its own lab

Contract with independent researchers or NPD firms

CATEGORIES OF NEW PRODUCTS

New to the world products New product lines Repositioning

Additions to existing product lines Improvements & revisions of existing products

Cost reductions

PRINCIPLES TO GUIDE NPD

Work with potential customers Let employees choose projects Give your employees dabble time Know when to let go COMPANIES THAT INNOVATE CONTINUOUSLY Sony Dell Computers Sun Microsystems FEATURES OF THESE COMPANIES: Creating a positive attitude towards innovation & risk taking Routinized the innovation process Practice teamwork Experiment their people to experiment & even fail!

Identify the strategic role of new products, then...

The New Product Development Process

1. Idea generation

2. 3. 4. Screening Business Prototype of ideas analysis development

5. Market Tests

6. Commercialization

GETTING IDEAS FOR NEW PRODUCTS

Customer analysis Competitor analysis Active search Brainstorming Customers, ex-customers, non- customers Employees especially sales force Suppliers Distribution channels Operations people Internal & external research & development

Criteria for New Products

there must be adequate market demand: this is necessary but not sufficient for success must satisfy key financial criteria must be compatible with environmental standards must fit with the companys marketing structure should also be compatible with production capabilities, satisfy legal requirements, and fit with corporate goals and objectives

RISK IN NEW PRODUCT DEVELOPMENT

IMPORTANT FACTS FedEx lost $340mn on its Zapmail DuPont lost an estimated $100mn on a synthetic leather called Corfam REASONS FOR FAILURE OF NEW PRODUCTS
Ignoring or misinterpreting market research Overestimating market size High development costs Poor design Incorrect positioning Ineffective advertising Wrong price Insufficient distribution support Competitors who fight back hard

Ten World-Class Product Failures

1. Fords Edsel automobile.
2. Duponts Corfam synthetic leather. 3. Polaroids Polavision. 4. United Artists Heavens Gate western movie. 5. RCAs Videodisc. 6. Times TV-Cable Week magazine. 7. IBMs PCjr. 8. New Coke. 9. R.J. Reynolds Premier cigarette. 10. Nutrasweets Simplesse fat substitute.

FACTORS THAT HINDER NPD Shortage of new ideas in certain areas Fragmented markets Social & governmental constraints Cost of development Capital shortages Faster required development time Shorter product life cycles

WHAT CAN A COMPANY DO TO DEVELOP SUCCESSFUL NEW PRODUCTS?

Unique , superior product A well defined product concept Technological & market synergy Quality of execution in all stages Market attractiveness

MARKETING MIX DECISIONS FOR NEW PRODUCT

LAUNCHING NEW PRODUCTS

Sales
Costs Profits
Marketing Objectives

Low sales High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus Build selective distribution Build product awareness among early adopters and dealers

Product Price Distribution Advertising

 Design a product. Determine marketing plan. Who will product be marketed to? How will it be marketed. Distribution channels Pricing Servicing product.

Designing and Marketing a Product

New Product Pricing Strategies

Market Skimming
> Setting a High Price for a New Product to Maximize Revenues from the Target Market.
> Results in Fewer, More Profitable Sales.

Market Penetration
> Setting a Low Price

for a New Product in Order to Attract a Large Number of Buyers. > Results in a Larger Market Share.

Distribution Decisions
Consumer Preferences Geographic Location Nature of Existing Business Ability to Service Products Markets to be Targeted Insurer Characteristics Degree of Control

NEW PRODUCT PROMOTION

Promotion spending is high to inform consumers of the new product and get them to try it. Selection of Media
Does the medium reach the greatest number of customers at the lowest cost? Does the medium provide opportunity to illustrate the product? Does the medium provide an opportunity to present an adequate selling message?

Selection of Media (contd.)

Does the medium present special problems? Is the medium flexible in terms of promotion? Does the medium meet the targeted geographical area? Does the medium fit the image of the business and offer enough prestige and distinction?

TOP 10 NEW PRODUCT LAUNCH MISTAKES

1. Not planning early enough 2. Poor or non-existent marketing strategy 3. Failing to define your target market 4. Launching too soon 5. Poor quality product 6. rigid, inflexible launch plan 7. Insufficient funding 8. Overestimating results 9. Not delegating (trying to do everything yourself) 10. Not having a crisis plan