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New product development

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New product development

  1. 1. ABSTRCTNew product development refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development. Once the major challenges in marketing planning is to develop ideas for new productsand to launch them successfully. The company will have to find replacements for itsproducts that have entered the declining stage. Because of changes in the customer’ testes,technology and competition, there is a need for marketing companies to develop newproducts. For example, the old radio become obsolete and transistors, CD players andDiscman were launched. Also, many new products fail in the market for various reasons andneed replacements. Customers always want new products, and competitors will do theirbest to supply them, unless the company acts fast.
  2. 2. CONTENTS.NO. Particulars PAGE NO. ABSTRACT 1. Introduction 03 2. Types of new product 04 3. Challenges in new product development. 05 4. Why new product fails? 06 5. New product development process. 07 6. Case study 1 13 7. Case study 2 18 2
  3. 3. INTRODUCTION:-Before knowing about what is new product development we must know what is a product forwhich an organization has to go through a lot of stages and phases? Then an organizationcomes up with his new product in the market.So let’s see what is a product?A product is anything that can be offered to a market to satisfy a need or a want. A product isa key element in the market offering. Marketing-mix planning begins with formulating anoffering to meet target customer’s needs and wants. The customer will judge the offering bythree basic elements: product features and qualities, services mix and quality and price.In business and engineering, New Product Development (NPD); is the term used to describe “the complete process of bringing a new product or service to market”. We must also be aware of the fact that companies must grow through New Product Development to survive and flourish in the long run. The core technology must be grown in the organization. Technology is growing at an ever increasing rate and must be integrated into product development otherwise the market niche of today will be absolute and displaced by companies with the new technology. One of the major challenges in marketing planning is to develop ideas for new products and to launch them successfully. There are two parallel paths involved in the NPD process:- 1) Involves the idea generation, product design, and detail engineering; 2) Market research and marketing analysis.Companies typically see new product development as the first stage in generating andcommercializing new products within the overall strategic process of product life cyclemanagement used to maintain or grow their market share.Result- New product development refers to original products, product improvements, product modifications, and new brands developed from the firm’s own research and development. 3
  4. 4. TYPES OF NEW PRODUCTS:- “There are several general categories of new products some are new to the market (ex.DVDplayer into the Home Movie market). Some are new to the company (ex. Game consoles forSONY), some are completely novel and create totally new markets (ex. The Airline Industry).When viewed against a different criterion, some new product concepts are nearly minormodifications of existing products while some are completely innovative to the company. Inthe area of new product development, here are some commonly accepted new productterms- Bozz, Hamilton and Allen identified six categories of new products:-1) New to the world products- New product that create an entirely new market. Theseproducts are new to the market. Consumers are going to use these products first time in theirlife. These products are innovative kinds of product.Example:- Apple i-Pod2) New product lines - New product that allow company to enter an established market forthe first time.Example:- Game consoles for SONY.3) Addition to the existing product lines: - When new product add supplement in theestablished product market. This is called as the addition to the existing product lines.Example: - Nokia add features in their hand sets.4) Improvement and revisions of existing products:- New products that provide improvedperformance or greater perceived value and replace existing products.Example: - Intel Centrino, Duo processor etc. 4
  5. 5. 5) Repositioning:- Existing product that are targeted to new market or market segments. Through this a company repositioning its products and goodwill in the market. For Example: - Gillette Company launched the new Mp3 power wet shaver for men in 2004. 6) Cost Reduction:- New product that provide similar performance at lower cost. Example: - Tata sky provide set top box at the lower cost with similar features which are present at the time of launching the prod CHALLENGES IN NEW PRODUCT DEVELOPMENT:- COMPANIES THAT FAIL TO DEVELOP NEW PRODUCTS ARE PUTTING THEMSELVES ATGREAT RISK:- When a company launches a new product in the market, it faces a lot ofproblems. There are lots challenge faces at the time of launching of the product. A companycan add new products through acquisition or development. The acquisition route can takethree forms. The company can buy other companies, it can acquire patents from othercompanies or it can buy a license or franchise from another company.The development route can take two forms. The company can develop new product in its ownlaboratories, or it can contract with the independent or new product development firms todevelop specific new products. We can identify six categories of new products.Less than 10 percent of all new products are truly innovative and new to the world. Theseproducts involve the greater cost and risk because they are new to both the company and themarket place. So company faces lots of challenges for launching the innovative product. Sothe companies have adopted some principle to guide its new product development..Several factor tend to hinder the new product development  Shortage of important ideas in certain areas.  Fragmented market.  Social and governmental constraints.  Cost of developments. 5
  6. 6.  Capital shortage.  Faster required development time.  Shorter product life cycle. There are some successful factors which help in making the new product a success one. One key product is making superior product and another is well defined product concept prior to the development. Other factors are market synergy,quality of execution in all stages & market attractiveness.WHY NEW PRODUCTS FAILS? New product development can be quite risky. New product continues to fail at disturbing rate. New product can fail for many reasons. New product continues to fail at a disturbing rate. Recent studies put the failure rate of the new consumer products at 95% in United States and 90% in Europe. It may be happen due to weak positioning strategy or may be the weak pricing strategy. There are some more important reasons which are as follows:- 1. Poor organization system for handling New Product Ideas:- • Poor criteria of working regarding new products. • Poor or weak procedures undertakings. • Poor coordination and co-operation between departments. They may be marketing, finance. Production etc. 2. Poor forecasting and market research:- • Unaware to the environment of marketing and audit sequences as well as poor anticipation and prediction about market. • Marketing myopia 3. Poor market planning:- • Poor long term planning 6
  7. 7. • Poor segmentation:-Process of converting the heterogeneous markets into homogeneous market. • Overpricing and product placement 4. Poor product design:- • Packaging • Finishing • Designing 5. High product development cost • Raw material cost • Production cost 6. Bad timing of introduction of new product:- Includes introduction of product at the time when market is not favorable for the product . 7. Poor product distinctive . 8. Lack of differential advantage. 9. Over optimism about the market plans leads to forecast that cannot be sustained in the real world. 10. Questionable pricing strategy implementation. 11. The advertising campaign generates an insufficient level of new product / new service awareness. These are the main failures which are hinder in new product development. And must be considered before launching a product in the market.NEW PRODUCT DEVELOPMENT PROCESS:There are some steps of new product of development, these are – 7
  8. 8. 1) Generation of the new idea2) Idea Screening3) Concept Development and Testing4) Business Analysis5) Product Development6) Marketing Strategy7) Test Marketing8) Commercialization . CONCEPT MARKETING DEVELOPME STRATEGY NT & & TESTTESTING DEVELOPME NT IDEA BUSINESS SCREANING ANALYSIS THE PROCESS OF NEW PRODUCT DEVELOPMENT PRODUCT IDEA DEVELOP- GENERATION MENT COMMERCIA- MARKET LISATION TESTING 8
  9. 9. Step 1. Idea Generation 9
  10. 10. The new product development process starts with the search of ideas. The objective of ideageneration is to gather as many ideas as possible & from any and all possible sources.Possible sources include:-R & D department, committee or task force Suppliers or market intermediariesTop executives CustomersSales representatives CompetitionProduction staff Freelance inventorsOther company employees ConsultantsNoncompetitive firms Patent applicationsThe publicIn addition, there are number of marketing research techniques that may be used when anorganization purposefully seeks to generate new product ideas. These include brainstorming,morphological analysis, scenario writing and demand forecasting. New product ideas can become from interacting with various groups & from creativity generation techniques. The emphasis, at this stage, is upon the quantity of ideas with no source, no idea,being rejected. Example, that Alexander Fleming, who is credited with the discovery ofpenicillin, did not realize its practical application as an antibiotic. This development was left toothers scientists and it did not happen for a decade after Fleming first observed the chancekilling of a bacterial culture on a dish. Likewise, it is said that when ICI first developedpolystyrene no one knew what to do with it.Step 2. Idea Screening Having generated a number, sometimes a large number of ideas, filtration processmust begin. The objective is to identify new product ideas which are weak in terms of theirchances of market success or their potential return-on-investment. The important point hereis that product ideas must be evaluated against the companys objectives. A company musthave a clear mission and know what business it is in. Only then can product ideas bematched with company objectives and resources.In screening ideas, the company must avoid two types of errors.A DROP-ERROR occurs when the company dismisses an otherwise goodidea. It is easy to find fault with other people’s ideas. Some companiesshudder when they look back at ideas they dismissed. 10
  11. 11. A GO-ERROR occurs when the company permits a poor idea to move intodevelopment and commercialization.Step 3. Concept Testing Many factors contribute to the failure of new products but a principal cause is theinability to predict customer response to new products and services. Systematic tests can beused to reduce expensive failures. These include; concept testing, market positioning tests,product testing and market testing.Concept testing involves presenting the product concept to appropriate target consumersand getting their reactions. The concepts can be presented symbolically or physically. Theproduct idea has to be converted to a product concept. The more the tested concepts resemble the final product or experience, the more dependable concept testing is. Today firms can use rapid prototyping to design products on a computer, and then produce plastic models of each. Potential consumers can view the plastic models and give their reactions.Concept 1: A snack food for people who, on specific occasions, find that they have insufficient time to consume a full meal. (The statement could be further elaborated to specify whether it is intended as an alternative breakfast food or to be taken at other times of the day).Concept 4: A health food intended for people active in sports.Concept 5: A food for babies to sustain health and promote rapid growth.It can be seen from these examples that a product concept statement will often reveal wherethe product is to be positioned in the market. Each product concept would engage a differentset of competitors. If only one concept statement is used then this may or may not positionthe product in the market in which it has the best chance of success or where potential profitsare greatest.Step 4. Business AnalysisA number of new product ideas which do not match company objectives and/or resourceswill possibly have been screened out and others will have been modified as a result of theconcept and/or positioning tests. Sometimes no product ideas remain after screening butassuming one or more ideas remain, and that decision have been made as to where in themarket the product might be positioned, the next task is to prepare a business analysis. Suchan analysis would involve an assessment of the total capital investment cost, the likelyreturn-on-investment and the payback period. Where at all possible this should be carried outbefore a physical product has been manufactured or otherwise produced. The businessanalysis phase typically involves the use of a set of pro forma financial statements showingwhat future income and expenses would be if a new product idea were fully developed andmarketed. Under this we cover the two following points: 11
  12. 12. 1. Estimating total sales: Total estimated sales are the sum of estimated first-time sales, replacement sales, and repeat sales. 2. Estimating costs and profits: Costs are estimated by the R&D, manufacturing, marketing, and finance departments. The most complex method of estimating profit is risk analysis. Here three estimates(optimistic, pessimistic and most likely) are obtained for each uncertain variable affectingprofitability under an assumed marketing environment and marketing strategy for theplanning period.Step 5 Marketing StrategyFollowing a successful concept test, the new-product manager will develop a preliminarymarketing-strategy plan for introducing the new product into the market. The plan consists ofthree parts: • The first part describes the target market’s size, structure, and behavior; the planned product positioning; and the sales, market share, and profit goals sought in the first few years. • The second part outlines the planned price, distribution strategy, and marketing budget for the first year. • The third part of the marketing-strategy plan describes the long-run sales and profit goals and marketing-mix strategy over time.Step 6. Product DevelopmentProduct development involves the creation and testing of one or more physical versions bythe R&D or engineering departments • Requires an increase in investmentIf the product concept passes the business test, it moves to the R&D and /or the engineeringdepartment into a physical product. Up to now it has existed only as a word description, adrawing or a very crude model. This stage will answer whether the product ideas can betranslated into a technically and commercially feasible product. The R&D department willdevelop one or more physical version of the product concept. It hopes to prototype thatsatisfies the following criteria- • Consumers see it as embodying the key attributes described in the product concept statement. • The prototype safety under normal use and conditions. • The prototype can be produced for the budgeted manufacturing.When the prototype re ready, they must be put thought rigorous functional and consumertests. The functional tests are conducted under laboratory and field conditions to make surethat the product performs safety and effectively. Consumer tests can ake a variety of forms,from bringing consumers into a lab to test the product versions to giving those samples touse in their houses. 12
  13. 13. Step 7. Test Marketing After the management is satisfied with the product’s functional performance, the product is ready to be dressed up with a brand name, packing and a preliminary marketing program o be tested in more authentic consumer setting. The purpose of the marketing is to learn how consumers and dealers react to handling, using and repurchasing the actual product and how large the market is. For test marketing consumer goods, the methodology involves sales-wave research, simulated store technique, controlled test marketing and test marketing. New industrial products typically undergo extensive product testing in the labs to measure performance, reliability, design and operating cost. The next most common method is a product use test where the manufacturer selects some potential customers who agree to use the new product for a limited period. A second common market test is to introduce the new industrial products at the trade shows. Testing can also be done in distribution and dealer display rooms.Step 8. Commercialization At this stage ,the company takes the decision to go in for large-scale manufacturing and marketing of the product .It gets to this stage only when all the previous step provide favorable single . At this stage, the company fully commits itself to commercialize the new product with the required investment in manufacturing and marketing. In launching the new product, the company must take four decisions:- 1) When: - when it is right time to introduce the product. 2) Where: - whether to launch in a single locality, a region, several region, the national markets etc. 3) To whom: - within the rollout market the company must target its distribution and promotion to the best prospect groups. 4) How:- company must develop an action plan for introducing the new product into rollout market.CASE STUDIES REGARDING NEW PRODUCT DEVELOPMENTCase study: TITAN WATCHES 13
  14. 14. Background: There was a time when owing a watch was a momentous event.It was seen as the first step into maturity, if not adulthood. This was alsothe time when buying a watch was similar to buying a car -- the choicewas limited and the product was purely functional. It was in this scenario that the Tata’s decided to enter the Indianwatch industry, with thorough understandings of the worldwide trends inwatches as their starting point. Two factors seemed critical to the successof any watch manufacturer, i.e., cutting edge technology (quartz) andstyling (whether elegant, sport or other). And the Tata’s believed that theyhad the ability to deliver on both. Even then, this entry was a momentous decision, considering thateverybody -- consumers as well as dealers -- were fairly complacent andsatisfied with what was available. HMT had a 90 %market share, and fewfound reason for complaint with the product. Those wanting more couldjust opt for the imported stuff.Researching the market: The first step for Titan, as with any seriousproduct launch, was consumer research. The first round was conductedin 1986. Given that the market was mostly comprised of mechanicalwatches, potential buyers of quartz watches were researched. Factorsgoverning purchase decisions, including opinions about the competition -- 14
  15. 15. HMT, Citizen and Allwyn -- were surveyed. At that time manufacturers’reputations, followed by styling were clearly the factors critical toconsumers. Given the Tata backing, it would seem that Titan was on safeground. By 1987, just before entry, further research into the existingproduct scenario revealed the following consumer perceptions :  Mechanical watches were -- Durable, reliable, easy to repair, affordable.  Imported watches were -- Emotionally satisfying status symbols, yet ‘risky’ to buy, as they were not backed by guarantees, and might also be counterfeit. There seemed to be a clear case of watches being divided intotwo segments -- those that delivered sufficiently on performance, andthose that brought great emotional satisfaction.Titan: Shifting the paradigmWhat then could Titan be? Titan sought to enter the market with quartztechnology, with the rationale that it was modern, international and cost-effective. To this end a 16-acre ultra modern factory was set up at Hosurat a cost of Rs.40 cr. -- one of the worlds’s most advanced and fullyintegrated manufacturing complexes. (All were working towards a launchdate within 2 years of the last research, i.e., 19 April 1987.Titan knew that the only way to be noticed and to be successful was toredefine the product category itself. The Titan product, therefore, wasdefined not as a watch, but as a personal wear accessory.The many Ps of the Paradigm Shift 15
  16. 16. After all possible research, Titan entered the Indian market courageously,with a product that was aimed to enter the national mind-set as a personalaccessory.It is worth nothing how, for its public face Titan’s stress was on the latter,with other elements of the marketing mix being allowed to take care of thepractical aspects of owning a timepiece. The 5 Ps of the mix, thereforewere:The Product  International styles, a wide range of 150 models.  Modern, superior quartz technology. 2 year (Tata) guarantee.The Price  Higher than existing Indian watches -- clearly an in-built premium.  Lower than foreign watches and those available at duty free shops.The PlaceThis was Titan’s most outstanding contribution to the Indian watchindustry. It made shopping for watches a pleasant experience. Titanpioneered exclusive Titan showrooms -- world class, modern, spacious --with a slick ambience having ‘mood windows’ for display, controlledlighting, granite finish, etc.The Promotion 16
  17. 17. This was one of the most visible faces of Titan. The innovative ‘showcase’advertising in the print medium depicted the wide range. Prices placedalongside helped consumers ‘shop’ off the page.MARKET SHARE FIGURES OF TITAN WATCHES(1991-92)Titan 57HMT 27Timex 00IMFQ 16Titan Sales 1991-92 (Primaries) --- in lacs : Rs. 21.76(1992-93)Titan 56HMT 23Timex 03IMFQ 18Titan Sales 1992-93 (Primaries) -- in lacs: Rs.24.75(1993-94)Titan 52HMT 13Timex 19IMFQ 16Titan Sales 1993-94 (Primaries) -- in lcas : Rs. 26.20.(1994-95)Titan 46HMT 09 17
  18. 18. Timex 23IMFQ 22Titan Sales 1994-95 (Primaries) -- in lacs: Rs. 29.87(1995-96)Titan 39HMT 07Timex 24IMFQ 30Titan Sales 1995-96 (Primaries) -- in lacs : Rs. 33.68By all accounts, and after 10 years, the Titan strategy has outlined thecorrect ways for pushing a mass brand. A quick look at the brand revealsthe following: Titan has changed the structure of the watch market As mentioned, by merely defining the product as a personalaccessory, rather than as a timepiece, Titan has been able to keep on re-inventing its products, and therefore, redefining its markets. Increased market size and share.The Titan Showroom has become a landmark on our cities’ streets. Howmany other brands can claim that? Within 10 years of its inception? Todayany mass entrant to India in the same category would find it extremelydifficult to match its quality of distribution. Those who tied up with Titan (a’la Timex) have benefited the most!Conclusion 18
  19. 19. There is no question that Titan today is a successful branding story. I feel quite strongly that Titan watches should always retain the ‘Titan’ name on the dial. I am not sure as to what extent the brand image of Titan has been enhanced by the introduction of Tanishq. However, what further action Titan should take to consolidate its position as the leader-innovator, so as to increase not only the total watch market, but also its market share, is a subject for future discussion.Case study:-2The case study of Bajaj pulsar: Bajaj has been synonymous with scooters in India, and scooters havebeen the typical family transportation vehicle for urban middle-class consumers. There was atime when the demand for Bajaj scooters far outstripped the supply, and the brand enjoyed anear-monopoly status. The policy of liberalization by the government and the changes in thecompetitive landscapes transformed the market for scooters. In addition, economic progressof the country- which improved the income levels of the people- and the rising aspirations ofthe middle class enabled Maruti 800 cars to gradually replace scooters from their role of amiddle-class family vehicle. In order to buckle the trend in the market for scooters, thecompany introduced technologically superior products.The four-stroke engine and a sleeker design helped in slowing down the decline in thedemand for scooters. However, the major strategic shift for the company was in the marketfocus: the company decided to concentrate on the motorcycles- the product strategy that wasincreasingly becoming a lifestyle statement for the youngsters. For achieving market dominance the company introduced an array ofmotorcycles. This approach helped the company in keeping the brand contemporary andrelevant for consumers. Bajaj has also introduced various sections of motorcycles it includespremium section as well as average section.CONCLUSION:- 19
  20. 20. As it was known that the trends of scooter had shown a high declinein its sales and resulting from that, In order to buckle the trend in the market for scooters, thecompany introduced technologically superior products.The four-stroke engine and a sleeker design helped in slowing down the decline in thedemand for scooters. However, the major strategic shift for the company was in the marketfocus: the company decided to concentrate on the motorcycles. Jumping from scooter for which (Bajaj motors was famous and had itsmonopoly in the market) to the motorcycle sections is the best example of new productdevelopment as well as technological advancement. Due to moving towards the motorcyclesection Bajaj again capture the market. And all this occur due to new technologicaladvancement and technological superior products. As it is known that the bajaj products aretechnically sound in mileage as compare to other company products. Like we can takeexample of:- • BAJAJ CT100 - 100cc • BAJAJ XCD -125ccAre some good example of the technological advancement of products and development ofnew products. So, it is simply proved that how new product development is necessary andbeneficial for Bajaj motors. This new product development policy help Bajaj in makingtechnological advanced products and also played important role in the increase of marketshare and sale. Simply we can say that not only Bajaj motors are benefited by new productdevelopment process each and every company can take advantage of it. Bibliography:-Following are the reliable sources referred in project completion:- 20
  21. 21. WEBSITES:-  http://www.google.com  http;//www.bajaauto.com  http;//www.metacase.comBOOKS:-  “Principal of marketing”- Philip Kotler and Gray Armstrong  Kothari C.R. , REASEARCH METHODOLOGY & MANAGEMENT.MAGAZINES:-  Business world Group- Business World  India Today group- Business Today 21