product development
TRANSCRIPT
PRODUCT DEVELOPMENT
P.SARANYAI-M.COM
SYNOPSIS:
New product planning and development.
Steps in new product development.
Management of product life cycle.
Product line and mix strategies.
Product development
The creation of products with new
or different characteristics that offer new or additional benefits to the customer.
Product development may involve modification of an existing product or its presentation , or formulation of an entirely new product that satisfies a newly defined customer wants and needs.
New product planning and development
Every company must develop new products which shape the company’s future. As the customer’s tastes and preferences are ever changing , new product development becomes a necessity for an organization.
Categories of new product: New to the world products: New
products that create an entirely new market , e.g., SONY’s Walkman.
New product lines: New products that allows a company to enter an established market for the first time. For example , an appliance manufacturer who launches microwave ovens for the first time.
Additions to the existing product lines: new products that supplement a company’s existing product line (package sizes , flavors , from window – type to split air-conditioners , and so on).
Improvements and revisions of existing products: new products that improved performance or greater perceived value and replace existing product.
Repositioning: existing products that are targeted to new markets or new market segments , e.g., products repositioned for other uses.
Cost reductions: new products that provide similar performance at lower cost , e.g., reverse osmosis – type water filter.
Challenges in new product development
Why do new products fail ?Over estimated market sizeWrong positioning of the new productDevelopment cost overshoot expectation Triggers hyper competitive market
positionSuperseded by better products from
competitors , by the time it reaches the market.
What stops new product development ?
Lack of ideasSocial and governmental constraintsTechnological constraintsToo high developmental costCapital shortageFaster time required from idea to productShorter product life cycle.
What are the criteria for new product development ?
Specific time frameOptimum potential market and growth rateMinimum return on sales and return on
investmentsShould lead to market leadership position
New product development process
Idea Generation:
New products ideas can come from:
Interacting with others (sales representatives and intermediaries)
Creativity techniques – attribute listing , mind mapping.
Idea screening:
Idea screening is the process of comparing and contrasting new product related ideas in order to select the most promising ones for your business. Not all ideas are relevant for your company. To be able to screen the good from the not so good , all ideas need to be evaluated according to some criteria , like strategic fit , technical difficulties , and market opportunities.
Concept testing
To expose the new product to a full-blown market test by engaging company’s sales force. The company thus use advertising and promotional campaign in these markets.
Business analysis:
Sales revenueCost of goods soldGross marginDevelopment costMarketing costContributionDiscountedCumulative discounted cash flow.
Product development
At this stage , the company has to decide whether the product idea can be translated into a technically and commercially feasible product , as there will be a considerable jump in investment if the company wants to go ahead with the proposal.
Moreover , consumer testing has to be done in the form of bringing consumers into the laboratory for usage under controlled conditions , giving them samples to use in their homes , or product demonstrations to elicit their off-the-off reactions.
Test marketing
To expose the new product to a full-blown market test by engaging company’s sales force.
The company thus use advertising and promotional campaign in these markets.
CommercializationMajor decisions to be taken are:Timing of commercialization , i.e., when to
commercialize? first entry , parallel entry , late entryThe geographic strategy , i.e., where to
commercialize?Who are the target market , i.e., whom to
commercialize?Introductory marketing strategy , i.e., how to
commercialize?
MANAGEMENT OF PRODUCT LIFE CYCLE
Introduction
The concept of product life cycle is concerned with the sales history of a product. It portrays there changes in sales and profit overtime.
Profits maximize before there sales are highest because the intensity of competition increases at the end of growth and before the start of maturity stage.
Stages in the product life cycle
Introduction : A period of slow sales growth as the product is introduced in the market. Profits are non-existent because of heavy expenses incurred in connection with product introduction.
Growth : A period of rapid market acceptance and substantial profit improvement.
Maturity : A period of a slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased competition.
Decline : The period when the sales show a downward drift and profits set eroded plateau off.
Benefits of product life cycle conceptThe product life cycle concept is useful to
chart individual item , brands , product forms and product classes.
This concept can also be used to chart styles , fashions and fads.
The management can understand what typically happens at different stages in product life. Therefore , it can improve its forward planning.
Different suitable price policies can be formulated for different products passing through different stages.
Criticisms against the concept:
It has a limited value
It measures only the fluctuations in sales and profits that a profit during the time of its fluctuations.
It does not explain the causes for these fluctuations or when they will occur.
PRODUCT MIX AND PRODUCT LINE
Meaning of product mix: The expression product mix refers to the collection of products dealt with by a business firm. The product mix is one of the elements in the product policy.
Definition of philip kotler : “product mix is the set of all product lines and items that a particular seller offers for sale to buyers”.
Meaning of the product line and item
At this stage , it is more appropriate to understand the meaning of the terms product line and product item.
A product item is a specific product. In the words of philip kotler, “product item is a distinct unit that is distinguishable by size , price , appearance or some other attribute”.
A product line , on the other , is a collective term. It refers to a group of products intended for essentially similar uses and possessing reasonably similar physical characteristics.
Dimensions of product mix:
Length of the product mix: the length of the product mix refers to the total number of items in its product mix.
Width of the product mix: the width of the product mix refers to the number of different product lines the company carries.
Depth of the product mix: it refers how many varieties are offered in each product line.
Consistency of the product mix: product mix is measure of hoe closely related its various product lines are to one another.
Product mix strategies
Expansion of product mixContraction of product mixAlteration of product mixPositioning the productTrading up and trading downProduct differentiation and market
segmentation
