Download - Lecture 10 (New Products)
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New Products
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Why do new products fail?
One study estimated that as many as 80% of new
consumer packaged products failed.
Only about 40% of new consumer products are
around 5 years after introduction
WHY????????????????????????
Overestimated market
Poor design
Incorrect positioning
Error in pricing
Poor marketing
Cost overrun
Competition
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What are new products????
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New Products
Product Modifications
Line extensions
Brand extensions
Really new products
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Branding
NewBrands
Multibrands
Brand ExtensionLine
Extension
Existing New
PRODUCT CATEGORY
BRAND
NAME
New
Existing
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Line ExtensionExisting brand names are extended to new forms, sizes,and flavors of an existing product category.
Dove Soap, Dove Gentle Exfoliating Soap & Dove freshmoisture Bathing Bar
Fair & LovelyFairness Cream-1978
Fair & LovelyAyurvedic Fairness
Cream-2001
Fair & LovelyFairness Cream with
extra brightness -2003
Fair & Lovely Menz Active-2006
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Brand Extension
Existing brand names are extended tonew or modified product categories.
Virgin Atlantic
Virgin Mobile
Virgin Cosmetics
Virgin Trains
Virgin Money
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80 Virgin Brands
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DETTOL
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ANCHOR
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Multibrands
New brand names are introduced in thesame product category.
HUL: Lux, Lifebuoy, Liril, Hamam,
Breeze, Dove, Pears, Rex
onaCannibalization
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New Brands
New brand names in new categories areintroduced
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Considerations in Addingor Dropping a Variant
Customer based New customer attracted
Old customer
cannibalization Confusion and dilution of
brand equity
Operations based Loss of economies of scale
Problems in gaining
additional distribution
Additional servicing needs
Old customers lost
Customer switching
Signal of weakness
Impaired efficiency
Maintaining distribution
Servicing old versions
Adding Dropping
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Stages in the new-product process
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Marketing information and methods used in the
new-product process
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Proactive Idea Generation
1. Customer analysis
2. Competitor analysis
3. Active search
4. Category analysis
5. Brainstorming
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Reactive Idea Sources
1. Customers
2. Employees
3. Suppliers
4. Distribution channels
5. Operations people
6. Internal and External R&D
7. Design8. Entrepreneurs
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The Walkman story
Akio Morita written in his book Made in Japan
Ibuka used to walk into my room carrying his heavysteoreo record player and a pair ofhead phones. Ibukascomplaint about the weight of the system gave me idea.
I immediately ordered my engineers take one of oursmall cassette recorders. Strip out recording unit, Stripout heavy speaker and replace with lightweight stereoamplifier. Put light weight headphones. It seemednobodyhad great hopes of the idea. I was full of
enthusiasm, but our marketing people were not. Walkman was a runaway success
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Common Formal Tests
Concept testing Surveys
Focus groups
Demonstrations
Product testing
Product tests
Discrimination and preference testing
Market tests
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Decisions for a Market Test
Action standards
Where to test markets
What to do How long
Cost
Information gathering
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a e s ar e
Why should laboratory and safety tests be
done?
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Really New Products
1. Create or expand a new category, thereby
making cross-category competition the key
2. Are new to customers for whom substantial
learning is often required3. Raise broad issues such as the appropriate
channels of distribution and organizational
responsibility
4. Create (sometimes) a need for infrastructure,software, and add-ons
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Evaluating Really New Products
1. Relative advantage
2. Compatibility
3. Risk
4. Complexity
5. Observability/communicability
6. Trialability/divisibility
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Evaluating New Products
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Evaluation Criteria for New Products
Customer Level
1. Do customers like it?
2. Is it unique?
3. Will they buy it?
4. How soon/fast will they buy it?
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Evaluation Criteria for New Products (cont.)
F
irm Level1. Does it add to our customer base through
Acquisition? Expansion? Loyalty/retention?
Enhanced brand equity?2. Does it detract from our customer base through
Cannibalization? Customer defections? Lowered brand equity?
3. Do we have the capabilities to Develop it? Produce it? Distribute and sell it? Buy or partner to do a-c?
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Evaluation Criteria for New Products (cont.)
Firm Level4. Will it be profitable
On a stand-alone basis? Long-run impact on produce line?
5. Are there other benefits associated with it Learning/capacity enhancement? PR?
6. Are there other costs associated with it
Legal liability? PR?
7. Can we control the market in the long run?