Production and Brand Management – Understanding Brands
New product planning
New product
A new product is a
product that is new to the company introducing it even though it may have been
made in same form by others.
Types of New Product
New to the world: this is new to the world. no close substitute were existed .innovators
will be attract the new product.
New to the company: This is new to the company, which is already
in the market.
Addition to existing product: This product is called as modified
product of basic product. Based on the Changes in the consumer tastes and
preferences, basic product will be reintroduced into the market with Some major
or minor changes.
Improved and Revised:
This product is advanced product of basic product with additional features.
Reduction in Cost: A
product is said to be a new product when it is introduced into the market with
reduced price.
New
product development (NPD) is the
complete process of bringing a new product to market. A product is a set of benefits offered for
exchange and can be tangible (that is, something physical you can touch) or
intangible (like a service, experience, or belief). There are two parallel paths
involved in the NPD process: one involves the idea generation, product
design and detail engineering; the other
involves market research and marketing
analysis. Companies typically see new product
development as the first stage in generating and commercializing new product
within the overall strategic process of product life cycle management used to maintain or grow their market share.
The
stages
- Ideas for new products can be obtained from basic research using a SWOT analysis (Strengths, Weaknesses, and Opportunities & Threats). Market and consumer trends, company's R&D department, competitors, focus groups, employees, salespeople, corporate spies, trade shows, or ethnographic discovery methods (searching for user patterns and habits) may also be used to get an insight into new product lines or product features.
- Lots of ideas are generated about the new product. Out of these ideas many are implemented. The ideas are generated in many forms. Many reasons are responsible for generation of an idea.
- Idea Generation or Brainstorming of new product, service, or store concepts - idea generation techniques can begin when you have done your OPPORTUNITY ANALYSIS to support your ideas in the Idea Screening Phase (shown in the next development step).
2. Idea Screening
- The object is to eliminate unsound concepts prior to devoting resources to them.
- The screeners should ask several questions:
- Will the customer in the target market benefit from the product?
- What is the size and growth forecasts of the market segment / target market?
- What is the current or expected competitive pressure for the product idea?
- What are the industry sales and market trends the product idea is based on?
- Is it technically feasible to manufacture the product?
- Will the product be profitable when manufactured and delivered to the customer at the target price?
- Develop the marketing and engineering details
- Investigate intellectual property issues and search patent databases
- Who is the target market and who is the decision maker in the purchasing process?
- What product features must the product incorporate?
- What benefits will the product provide?
- How will consumers react to the product?
- How will the product be produced most cost effectively?
- Prove feasibility through virtual computer aided rendering and rapid prototyping
- What will it cost to produce it?
- Testing the Concept by asking a number of prospective customers what they think of the idea - usually via Choice Modeling.
- Estimate likely selling price based upon competition and customer feedback
- Estimate sales volume based upon size of market and such tools as the Fourt-Woodlock equation
- Estimate profitability and break-even point
- 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
- New program initiation
- Finalize Quality management system
- Resource estimation
- Requirement publication
- Publish technical communications such as data sheets
- Engineering operations planning
- Department scheduling
- Supplier collaboration
- Logistics plan
- Resource plan publication
- Program review and monitoring
- Contingencies - what-if planning
- 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
CRITERIA FOR EVALUATING
NEW PRODUCT
1.
Is there sufficient demand?
2. Will it be profitable?
3. What is the likely payback period?
4. Does it fit the firm’s image?
5. Does it fit the firm’s product portfolio?
6. What is the likely life cycle of the product?
7. How is the competition?
8. How easy will it be to manufacture?
2. Will it be profitable?
3. What is the likely payback period?
4. Does it fit the firm’s image?
5. Does it fit the firm’s product portfolio?
6. What is the likely life cycle of the product?
7. How is the competition?
8. How easy will it be to manufacture?
FAILURE OF NEW
PRODUCTS:
1.
Poor idea
2. Under estimation of competition
3. Over production cost
4. Poor performance
5. Technical problems
6. Poor planning
7. Inadequate promotion
8. Poor packaging
9. Faulty pricing
2. Under estimation of competition
3. Over production cost
4. Poor performance
5. Technical problems
6. Poor planning
7. Inadequate promotion
8. Poor packaging
9. Faulty pricing
SUCCESSIVE FACTORS OF
NEW PRODUCT
1.
Reasonable pricing
2. Attractive packing
3. Effective promotion strategy
4. Proper planning
5. Technical support
6. Good performance
7. Low competition
8. Good idea
2. Attractive packing
3. Effective promotion strategy
4. Proper planning
5. Technical support
6. Good performance
7. Low competition
8. Good idea
CONSUMER
ADOPTION PROCESS
Adoption is an individual’s decision to become a regular user
of a product. Sequence of events beginning with consumer awareness of a new
product leading to trial usage and culminating in full and regular use of the
new product. Over time the adoption process resembles a bell curve formed by
innovators, early adopters, the majority of consumers, late adopters, and
laggards.
An innovation is any good,
service, or idea that is perceived by someone as new. The idea may have a long
history, but it is an innovation to the person who sees it as new. Innovations
take time to spread through the social system. Rogers defines the innovation
diffusion process as “the spread of a new idea from its source
of invention or creation to its ultimate users or adopters.”
The consumer-adoption process focuses on the mental process
through which an individual passes from first hearing about an innovation to
final adoption. Adopters of new products have been observed to move through
five stages:
1. Awareness -The consumer becomes aware of the innovation but lacks
information about it.
2. Interest-The consumer is stimulated to seek information about the innovation.
3. Evaluation -The consumer considers whether to try the innovation.
4. Trial-The consumer tries the innovation to improve his or her estimate of its value.
5. Adoption -The consumer decides to make full and regular use of the innovation.
The new-product marketer should facilitate movement through these stages. A portable electric dishwasher manufacturer might discover that many consumers are stuck in the interest stage; they do not buy because of their uncertainty and the large investment cost. But these same consumers would be willing to use an electric dishwasher on a trial basis for a small monthly fee. The manufacturer should consider offering a trial-use plan with option to buy.
FACTORS
INFLUENCING THE ADOPTION PROCESS
People differ in their approach towards adopting a new
product. Some differ in adopting new fashion, some in adopting new appliances,
some doctors are hesitant to apply new medicines and still some farmers do not
apply new implements. This is called adoption culture. Once the customer buys
the product, they increase the use and then others follow. Here others means
are late adopters by nature. Let us categorize these customers into three units
1) One who are early adopters. They are very quick in their
response. These people are venture some and willing to try new ideas. In fact
they are innovators in life and early adopters.
2) Secondly Early Majority. They are very careful people and take time to adopt things. They tend to collect information about the change or the product, study carefully and then adopt on the basis of their merits.
3) The third ones are late majority and traditionalists. They are the ones who adopt late and then use the product.
The following the main factors influence the customers towards new product
1.
Individual
readiness to try new product
2. Characteristics of innovation
3. Personnel influence
4. Relative advantage
5. Compatibility
6. Social acceptability
7. Cost
2. Characteristics of innovation
3. Personnel influence
4. Relative advantage
5. Compatibility
6. Social acceptability
7. Cost
PRODUCT LIFE CYCLE
MANAGEMENT-SPECIAL ISSUES
INTRODUCTION
All products
and services have certain life cycles. The life cycle refers to the period from the product’s first launch into the market until its final withdrawal from market. During this period significant changes are made in the way that the product is behaving into
the
market i.e. Its reflection
in respect
of
sales
to
the
company that introduced it into the market. Since an increase in profits is the major
goal of a company that introduces a product into a market.
The understanding of a product’s life cycle, can help a company to understand and realize when it is time to introduce and withdraw
a product from a market, its position in the market compared to competitors, and the product’s success or
failure.
For a company to fully understand the above and successfully manage a product’s life cycle, needs to dev e l o p strategies and methodologies, some of which are discussed
later on.
PART 1: PRODUCT LIFE CYCLE MODEL
The product’s
life cycle - period usually
consists of five major steps
or phases: Product development, Product introduction, Product
growth, Product maturity and Product decline. These
phases exist and are applicable to all products
or services.
Fig. 1: Product Life Cycle Graph
Product development
phase begins when a company finds and
develops a new product idea. This involves
transforming various pieces of information and converting them into a new product. A
product is usually undergoing several
changes involving a lot of money and time during development, before it is sent
to target customers through test markets. Those products
that survive the test market are then introduced into a real mmarket and the introduction phase of the product begins.
During the product development phase,
sales are zero and revenues
are negative.
It
is the
time of
spending with absolute no return.
2. INTRODUCTION PHASE
The introduction phase of a product includes the product launch with its requirements to getting it launch in such a way so that it will have maximum impact at the moment of sale. A good example of such a launch is the launch of “Windows XP” by Microsoft Corporation.
The introduction phase of a product includes the product launch with its requirements to getting it launch in such a way so that it will have maximum impact at the moment of sale. A good example of such a launch is the launch of “Windows XP” by Microsoft Corporation.
This period
can be described as a money
loss period compared to the maturity phase of a product. Large expenditure on promotion and advertising is common, and quick
but costly service requirements
are introduced. A company must be prepared to spent a lot
of money and get only a small proportion of that back.
In this phase
distribution arrangements are introduced. Having
the product in every counter
is very important and is regarded as an impossible challenge. Some companies avoid
this stress
by hiring external contractors or outsourcing the entire distribution arrangement. This has
the benefit of testing an important marketing tool such as outsourcing.
Pricing is something else for a company to consider during this phase. Product pricing usually follows one or two well structured strategies. Early customers will pay a lot
for something new and this will help a bit to minimize that sinkhole that was mentioned
earlier. Later the pricing policy should be more aggressive so that the product can become competitive.
Another strategy is that of a pre-set price believed to
be the right one to maximize sales. This however demands a very good knowledge of the market
and of what a customer is willing to
pay for a newly introduced product.
3. GROWTH PHASE
The growth phase offers the satisfaction of increasing the sales in the market place. This is the appropriate timing to focus on increasing the market share. If the product has been introduced first into the market, (introduction into a “virgin”1 market or into an existing market) then it is in a position to gain market share relatively easily. A new growing market alerts the competition’s attention.
The growth phase offers the satisfaction of increasing the sales in the market place. This is the appropriate timing to focus on increasing the market share. If the product has been introduced first into the market, (introduction into a “virgin”1 market or into an existing market) then it is in a position to gain market share relatively easily. A new growing market alerts the competition’s attention.
The company must
offer product extensions, services, warranty and try to differentiate them from the competitors ones. A frequent
modification process
of the product is an effective
policy to discourage competitors from gaining
market share by copying
or offering similar products.
Promotion and advertising continues, but not in the extent that was in the introductory phase and it is oriented to the task of market leadership and not in raising product awareness. A good practice is the
use of external promotional
contractors to build awareness and interest in market.
This period
is the time to develop efficiencies and improve product availability and service. Cost efficiency and time-to-market and pricing
and discount policy are major
factors in gaining customer confidence. Good coverage in
all marketplaces is
worthwhile goal throughout the growth phase.
4. MATURITY PHASE
When the market becomes saturated with variations of the basic product, and all competitors are represented in terms of an alternative product, the maturity phase arrives. In this phase market share growth is at the expense of someone else’s business, rather than the growth of the market itself. This period is the period of the highest returns from the product. A company that has achieved its market share goal enjoys the most profitable period, while a company that falls behind its market share goal, must reconsider its marketing positioning into the marketplace.
When the market becomes saturated with variations of the basic product, and all competitors are represented in terms of an alternative product, the maturity phase arrives. In this phase market share growth is at the expense of someone else’s business, rather than the growth of the market itself. This period is the period of the highest returns from the product. A company that has achieved its market share goal enjoys the most profitable period, while a company that falls behind its market share goal, must reconsider its marketing positioning into the marketplace.
During this period new brands are introduced even when they compete with the company’s
existing product and model changes are more frequent (product, brand, and model).
This is the time to extend the
product’s life.
Pricing and discount policies
are often changed
in relation to the competition policies i.e. pricing moves up and down accordingly with the competitors one and sales
and coupons are introduced in the case of consumer products.
Promotion and advertising
relocates from the scope of getting
new
customers,
to
the
scope
of
product
differentiation in terms of quality
and reliability.
The battle
of distribution continues using multi distribution channels2. A successful product maturity
phase is extended
beyond anyone’s timely expectations. A good example of this is
“Tide” washing powder, which has grown old, and it is still growing.
5. DECLINE PHASE
This is the time to start withdrawing variations of the product from the market that are weak in their market position. This must be done carefully since it is not often apparent which product variation brings in the revenues.
This is the time to start withdrawing variations of the product from the market that are weak in their market position. This must be done carefully since it is not often apparent which product variation brings in the revenues.
The prices must be cut and
promotion should be pulled back at a level that
will make the
product presence visible
and at the same time retain the “loyal”
customer. Distribution is narrowed.
The basic channel is should be kept efficient but alternative channels should be abandoned.
PART2: ANALYSIS OF PRODUCT LIFE CYCLE MODEL
There are some major product life cycle management techniques that can be used to optimize a product’s revenues in respect to its position into a market and its life cycle. These techniques are mainly marketing or management strategies that are used by most companies worldwide To comprehend these strategies one must first make a theoretical analysis of the model of product life cycle.
There are some major product life cycle management techniques that can be used to optimize a product’s revenues in respect to its position into a market and its life cycle. These techniques are mainly marketing or management strategies that are used by most companies worldwide To comprehend these strategies one must first make a theoretical analysis of the model of product life cycle.
In the mid 70’s the model of product life cycle described in “Part 1”, was under heavy
criticized by numerous authors. The reasons behind
this
criticism
are
described
below:
a. The shift changes
in the demand of a product
along a period of time makes the distinction of the product life cycle phase very difficult,
the duration of those almost
impossible to predict and the level
of sales of the product somewhat in the realm of
the imagination.
b. There are many products
that do not follow the usual shape of the product life cycle
graph as shown in fig.
c. The product life cycle does not entirely
depend on time as shown in fig.1. It also depends on other parameters such as management policy, company strategic
decisions and market trends. These parameters are difficult to be pinpointed and so are not
included in the product life cycle as described in “Part 1”.
Nevertheless, a product manager must know how to recognize which phase of its life cycle is a product,
regardless of the problems in the model discussed above. To do that a good method is the one, suggested by Donald Clifford in 1965, which
follows.
- Collection of information about the product’s behavior over at least a period of 3 – 5 years (information will include price, units sold, profit margins, return of investment – ROI, market share and value).
- Analysis of competitor short-term strategies (analysis of new products emerging into the market and competitor announced plans about production increase, plant upgrade and product promotion).
- Analysis of number of competitors in respect of market share.
- Collection of information of the life cycle of similar products that will help to estimate the life cycle of a new product.
- Estimation of sales volume for 3 – 5 years from product launch.
- Estimation of the total costs compared to the total sales for 3 – 5 years after product launch (development, production, promotion costs). The estimate should be in the range of 4:1 in the beginning to 7:1 at the stage where the product reaches maturity
