Chapter-2 New Product DevelopmentMeaning- the development of original products, product improvements, product modifications, & new brands through the firms own R &D efforts. New products can be broadly classified into 2 groups1)New products arising out of technical innovations- It includes intrinsically new products having a new functional utility.

2)New Products arising out of MarketingOriented Modifications includes products that come out of marketingoriented innovations , or some changes in design, the addition of a new feature, a change in package in EXISITING PRODUCTS. These are essentially NEW VERSIONS of existing products, the newness may be because of some modification in the ingredients used etc. Repositioning, finding new use for the

existing product, offering the existing product with new sales appeal to new market segment.______________*********______________

Stages in new product developmentGenerating new product ideas Idea screening Concept testing Marketing strategy development Business / market analysis Actual product development Test marketing Commercialization

1- Generating new product (NP) ideasNew product ideas may emanate from customers, dealers, in-company sources including the market research group & external research organizations. Consumers problems, are the most fertile ground for the generation of new ideas. Sometimes, NP ideas come emanate just as a matter of happening.

E.g.Walkmanread the Walkman story from Ramaswami, pg.no-337.

2- Idea screeningScreening NP ideas in order to spot good ideas & drop poor ones as soon as possible. Answers are sought to the questions like1)In there any felt need of the product? 2) Is it an improvement over existing product? 3)Is it close to our current line of business? Or is it totally different?

4) Can the existing production & marketing organizations handle the product? or does it need extra expertise in production & marketing front? The most attractive ideas pass on to the concept testing.

3- Concept development & testingIn this step, the product concept itself is tested at this stage. Product concept is a detailed version of the NP idea stated in meaningful consumer terms. Concept testing- testing NP concepts with a group of target consumers to find out if the concept have strong consumer appeal.

Concept testing is of special importance when a totally NP in contrast to a me too product is being planned for introduction. For some concept tests, a word or a picture description might be sufficient. Virtual reality-use of computers & sensory devices (goggles or gloves) to simulate reality. E.g.- hairdressers use virtual reality for years to show consumers how they might look with a new style.

After being exposed to the concept, consumers then may be asked to react to it by answering questions, such as1)Do you understand the product concept? 2)Do you believe the claims about the product? 3)What are the major benefits of the product? 4) What are its advantages compared with other version?

5)What improvements in the products features would you suggest? 6)What should be the reasonable prize to charge for the product? 7)Who would be involved in your decision to buy the product? 8)Would you buy such product? definitely, probably, probably not, definitely not.

4- Marketing strategy developmentDesigning an initial marketing strategy for a NP based on the product concept. It consists of 3 parts- the 1st part describes target market, product positioning, market share, profit goals sales for the first few years. The 2nd part of the marketing strategy outlines the products planned price, distribution & marketing budget for the

year. The 3rd part describes the planned long-run sales, profit goals, & marketing strategy.

5- Business/market analysisA review of the sales, costs & profit projections for a NP to find out whether these factors satisfy the companys objectives. This stage is of vital importance since this stage will decide whether the project is worth proceeding with. Factors to be taken into considerationdemand estimate, seasonal patterns, price elasticity of demand, types of

marketing channels, major competitors, their market share, the dominant market segments held by them etc.

6- Actual product developmentSo far, the product may have existed only as a word description, a drawing or perhaps a crude mock-up. At this stage the product moves into product development. Here R&D develops the product concept into physical product. A pilot production facility is set up. By this time, the firm is by-&-large committed to the NP.

This step calls for the heavy investment. Besides R&D, marketing & production departments are actively involved at this stage.

7- Test marketingIt is the stage of NPD in which the product & marketing program are tested in more realistic market settings. This step lets the company test the product & its entire marketing programpositioning strategy, advertising, Distribution, pricing, branding & packaging, & budget levels. The NP is launched & marketed in a few select test cities/towns.

The selected test markets will be representative of the final market. Its time-consuming process since reliable results require long time. E.g.- when HUL had launched is Organics, the shampoo it sampled 30 million sachets in selected market territories.

8-CommercialisationIntroducing a NP into the market. At this stage, the company takes the decision to go in for a large-scale manufacturing & marketing of the product. The company launching a NP must first decide on introduction timing. E.g.- If DaimlerChryslers new fuel-cell electric car will eat into the sales of the company's other car's, its introduction

may be delayed. _____________**********_______________

Portfolio AnalysisIt is a tool which management identifies & evaluates the various businesses/products making up the company. Portfolio analysis is basically done in strategic planning. Managements 1st step is to identify Strategic business unit (SBU) SBU- A unit of the company that has a separate mission & objectives & that can be planned independently from

other company business. E.g.- a SBU can be a division / product line/ within a division single product or brand. The next step in portfolio analysis calls for management to assess the attractiveness of its various SBUs & decide how much importance/support each SBU deserves. Some companies stick to their knitting i.e. carry out a less diversifies business

Some companies has a diversified range of product portfolios under its roof e.g.- GE GE appliances, GE capital, GE Power Systems, GE global consumer finance, GE lighting etcto name a fewthese are all called as SBUs Now out of all these SBUs, which 1 is the most beneficial to GE? And the answer to this question lies in portfolio analysis.

BCG MATRIXM A R K E T G R O W T H R A T E

H I G H L O W

STAR

QUESTION MARK

?CASH COW DOG

$LOW RELATIVE MARKET SHARE HIGH

THE BOSTON CONSULTING GROUP APPROACH- it basically classifies businesses according to growthshare matrix Stars-high growth rate, high share businesses. Often need heavy investment to finance their rapid growth. Eventually their growth will slow down & they will turn into cash cows. Cash cows- low-growth, high-share businesses. These established & successful SBUs need less investment

to hold their market share. Thus these businesses have already produced lot of cash which might be utilized/invested to support the upcoming SBUs E.g.- Bajaj Scooter Question mark low share, high growth businesses. They require a lot of cash to hold / increase their share. Management should think about which Q.marks it should try to build into stars & which should be phased out.

Dog-low-growth, low- share businesses they may generate enough cash to support themselves but do not promise to be large sources of cash. _________________________________

The ten circles in BCG matrix represent a companys 10 current SBUs. The company has 2 stars, 3 q.marks, 2 cash cows, & 3 dogs The areas of circles are proportional to the sale in Rs. This company is in a fair shape although not in good one. It should invest in more promising q.marks to make them stars, & should maintain stars to convert them into

cash cows. fortunately it has 2 good sized cash cows so income from these cash cows will help finance the company's Qmarks, stars, dogs.

Product Market Expansion GridEXISTING PRODUCTS EXISTING MARKETS NEW PRODUCT

MARKET PENETRATION

PRODUCT DEVELOPMENT

NEW MARKETS

MARKET DEVELOPMENT

DIVERSIFICATION

Its a portfolio planning tool for identifying company growth opportunities through market penetration, product development, market development & diversification. Market penetration- a strategy for company growth by increasing sales of current products to current market segments without changing the product. E.g.- Starbucks opening up more new outlets to increase sales of coffee Market development- a strategy for

company growth by identifying &developing new markets for current company products. e.g.-Starbucks may encourage senior citizens to visit its coffee shop for the 1st time. Product development- a strategy for company growth by offering modified/new products to current market segments e.g.-Starbucks had increased its food offerings to bring customers in its store during lunch & dinner time.

It has introduced coffee ice-cream, bottled coffee drinks etc. Diversificationa strategy for company growth through starting up or acquiring business outside the companys current products & markets e.g.-Starbucks might consider to introduce the branded casual clothing with the Strabucks experience ___________________________________

BrandingWhat is BRAND???- a name, term, sign, symbol or design, or a combination of these, intended to identify the goods/service of one seller or group of seller & to differentiate them from those of competitors. examples of brands- Milkmaid, Nike, Pizza Hut, Complain, Johnson & Johnson, Boost, Cherry Blossom. E.g.- most consumers would perceive a bottle of John Musk perfume as a high

quality, expensive product. But the same product in an un-labeled bottle would likely be viewed as lower in quality or even the duplicate one. Significance of branding- branding helps buyers in many ways- 1) brand name helps consumers identify products that might benefit them. 2) brands also tell the buyer something about the product quality. 3) buyers who always buy the same brand are sure of the quality , features etc.

4)branding gives some advantages to seller too- the sellers brand name & trademark provide legal protection for unique product features that otherwise might be copied by competitors ___________________________________ Brand name, logo & sloganHMVs Masters Voice- the picture of dog with His Masters Voice lent more meaning to the logo.

Onida- the green-eyed devil- neighbor's envy, owners pride- nothing but the truth AT&T- the globe- connecting people, anytime, anywhere. Air Indias Maharaja- A mascot of a king greeting the passengers. Asian Paints Gattu- little boy with paintbrush in 1 hand & a dripping can of paint in other hand. Kelvinators Penguin- this mascot is identified with extreme cold climate goes well with product.

AT&T

MILKMAID

HMV

KELVINATOR

Branding strategy-building strong brandsBrand Equity Brand Positioning Brand Name Selection Brand Sponsorship-1)manufacturers /private/store brand name 2)licensing 3)co-branding etc. Brand Development Brand Rejuvenation Brand Relaunch

1-BRAND EQUITYDef- Brand's power derived from the goodwill and name recognition it has earned over time, and which translates into higher sales volume and higher profit margins against competing brands. User ship of the brands, consumer loyalty, positive symbols, favorable

associations around the brand bundle of all these attributes together result in brand equity. In simple words, brand equity is the value/ the worth of the brand. Criteria such as- market share, market ranking, brand stability, track record of product internationally, market trends,

advertising & promotional support & legal protection are used to measuring brand equity.

Components of brand equityBrand Loyalty- Wilkie (1994) defined brand equity as a favorable (positive) attitude & consistent purchase of a particular brand. This indicates the more the no. of brand loyal customers, the heavier the assets side. Brand Awareness-brand loyalty CAN NOT be achieved if there is no brand awareness. A familiar brand will always be purchased in preference to an unknown alternative under any condition.

Brand Associations- these are the brand related thoughts, feelings, images, perceptions, beliefs, experiences, attitudes, & so on that become linked to the brand. How the person associated the brand with him/her Brand Comprehension- it is what consumers think of a brand. How they comprehend / understand / grasp / conceive it.

Brand Acceptabilitythis refers whether the brand is accepted by the consumers or not. Brand Preferencethis attitude represents the like-dislike feeling towards a brand. Brand Personality- the specific mix of human traits that may be attributed to a particular brands. There are about 5 brand personality traits1)Sincerity down-to-earth, honest, wholesome, cheerful .e.g.-SBI

2)Excitement daring, high-spirited, imaginative. e.g.- Thumps-Up, MTV 3) Competence reliable, intelligent, Successful e.g.- Aaj Tak 4)Sophistication upper-class, charming. e.g.- Lakme 5) Ruggedness outdoorsy, tough, macho. E.g.- Tata Sumo, Levis Brand Image- it is the perceptions & beliefs held by consumers, as reflected in the associations held in consumer memory.

2-Brand PositioningBrand Positioning- can be done at 3 levels 1) Product Attributes 2) Benefits 3) Beliefs & Values 1)Attributes- focus on attributes- Dove soap has one quarter cleansing milk cream & is positioned as moisturizing soap. 2) Benefits- focus on desirable benefit sought- Dove marketers can go beyond the brands cleansing cream attribute & talk about the resulting benefits of softer skin.

Volvo- safety, Nike- performance,Fedex- guaranteed overnight delivery 3)Beliefs & Values- focus on values & beliefs. It has an emotional appeal. Dove marketers will not only talk about cleansing cream attribute & soft skin benefit but about how these will make you more attractive & charming. This strategy works on intangible attributes.

3-Brand Name SelectionA good brand name will be distinctive. It will be easy to pronounce, recognize, remember- E.G.-Tide It may denote something about the nature/function of the product e.g.Clinic All Clear, Odonil, Burnol, Sunsilk It will also be appealing It should be capable of registration & legal protection.

Family / umbrella brand names- in this case, different products of the company are marketed under one brand name. E.g.- Amul Amul ghee, Amul ice cream, Amul Butter etc. Videocon- TV, washing m/c, VCRs, refrigerators, Individual brands names- HLL has individual brands like Dove, Surf, Rin, Nihar etc.

4-Brand SponsorshipA Manufacturer has 4 sponsorship options1)Manufacturers brand- IBM, Kellogg, Bajaj, Johnson & Johnson 2)Private/Store/Middlemens Brandsometimes manufacturers leave their products for branding by the distributors/retail chains. Such brands are called as Middlemen's brands. E.g.-Spencers Daily, Foodworld, More etc.

3)Licensing- most companies spend years & millions to create their own brand names. But some companies license names / symbols previously used by other manufacturers, names of well-known celebrities, character from a popular movie/books. Companies pay an hefty royalty to use such name E.g.-A perfume is named after the name of Actress Shilpa Shetty SS, Pokemon, Calvin Klein, Armani etc.

4)Co-branding- it is the practice of using the established brand names of 2 different companies on the same product. E.g.-Dominos Pizza & Coca Cola. Volvo advertises that it uses Michelin tyres.

5-Brand Development StrategiesProduct categoryExisting New

Existing Brand Name

Line Extension

Brand Extension

Multibrands New

New Brands

Brand developmentIt means using a successful brand name to launch a new or modified product in a new category. Types of brand extensions 1) Line extension- it occurs when a company introduces additional items In a given &same product category under the SAME brand name such as new flavors, forms, colors, ingredients, size etc.This is known as the principle of Benefit Transfer.

The core strength of the parent brand can be leveraged for new items. e.g.- Sunrise Coffee - extended to Sunrise Premium, Sunrise Extra Coffee. All the products are in the same line coffee Surf- Surf Excel, Surf Excelmatic, International Surf Excel etc.

2)Brand Extensiona) Related line (category extension)- Here the brand name is extended over different products but products are related in some way. In other words they belong to a category. E.G.- category- cosmetics- Ponds Dream flower Talk, Ponds Sandal talk, Ponds Cold Cream, Ponds Moisturizing Lotion, Ponds Face Wash etc. e.g.- Dettol soap, Dettol Plaster, Dettol Hand wash. Maggie noodles, Maggie Ketchup, Maggie Soup etc.

b) Unrelated line (outside category

extension)here the brand name is extended completely new & unrelated products. e.g.-Mattel has extended its enduring Barbie Doll brand into new categories ranging from Barbie home furnishing, Barbie cosmetics, Barbie electronics, Barbie Books etc. Tata Salt & Tata in Telecommunication Services, Tata Steel etc.

Multibrands-new brands, same product category- companies often introduce additional brands in the same category. E.g.- HUL has premium Soap category Moti & in ordinary soap category- Hamam, Lifebuoy or P&G has 3 shampoos viz.Pantene, Head & Shoulders &Rejoice. In this, the product category is same (bath soap) but there are various brands under it.

New Brands- new brand name- new product category a company may create a new brand name when it enters a new product category. E.g.-Living Media Group has India Today magazine in print media. In Electronic media they came up with the news channel Aaj Tak & then Red FM in radio categories. _______________________________

6-Brand RejuvenationIt involves adding value to an existing brand by improving product attributes & enhancing its overall appeal. It is intended to refocus the attention of the customers on existing brands. It aims at revival of brand. The intention is to breathe some new life into a brand that may show a decline It keeps the brand live & in focus.

E.g.- New Horlicks- it claimed more nourishment through additional protein & calcium, 8 essential vitamins & iron. New, super, special, premium, deluxe, fresh, extra strong are some of the expressions used while rejuvenating the brands. New Vicks Vaporub- A 100 year old brand of P & G always undergoes rejuvenation process. It changed its packaging, new promotion campaign was carried out.

7-Brand RelaunchSome brands fail to take-off in their initial stage of PLC itself, some face decline after the profitable life. The companies having invested money & effort in them do not want to give up easily. They usually want to give the brand one more trial. Some improvements/changes may be incorporated & brands are Relaunched

E.g.-Santoor- Wipros Santoor soap ended up as an also-ran soon after it was launched. Company relaunch it with some reformulation as New Santoor Action 500- P&G re-positioned its multi-symptom cold tablet with analgesic plus (pain killer). Repositioning the product may be used as a tool to relaunch the product.

PackagingEveryday we come across many products with different types of packets, tubes & containers etc. It is the activity of designing & producing the containers or wrapper for a product. The package may include a primary container the tube holding the tooth paste Secondary package cardboard box

containing the tube that can be thrown away. Finally it can include a shipping package necessary to store, identify & ship the product- a corrugated because carrying 6 dozens of tubes of tooth paste

Functions of packagingProtection one of the major functions of packaging is to protect the product from the damage caused due to transport, time & environment for the natural & manufactured product. 1)Natural deterioration caused due to microorganism, cold, dry environment. 2)Physical protection protection from fiction, vibration etc.

Information the packaging conveys necessary information to the consumers like- product features, ingredients, weight, size, MRP, date of manufacturing, methods of preparations, cautionary information, expiry date, nutritional benefits, Utility of use - the convenience packaging has been devised for foods, household chemicals, drugs, paints, adhesives, cosmetics etc.

Promotion- companies use attractive packaging, colors, logos, symbols & captions to promote the product that can influence purchase decision.

Package materialWood & wood derivatives- it is one of the oldest forms of packaging. The wooden boxes & cartons are extensively used. Paper is the most common material of wood derivative. Corrugated boxes, paper bags etc. are used often as packaging material. Plastics - films of low density & high density polyethylene (LDPE & HDPE) , polypropylene etc are used.

Merits- 1) water proof & moisture proof property 2)capacity to provide barrier to vapor 3) greater resistance to sun exposure 4) light weight 5)alkali & acid proof property 6)attractivness & transparency. Tetra packs- it is the new trend in food packaging. Here the package as well as the contents both are sterilized & human handling is avoided. The package consists of thin layers of plastic & paper.

Fruit juices, milk etc are packaged in Tetra packs. It has an edge over cans since their contents have a shelf life of 3 months without the addition of preservatives. E.g.- Parse's Frooti, Tropicana etc. Glass1)Bottles- narrow necks which facilitated pouring & minimize the sizes of closures needed.

Generally used for liquids. E.g.- soft drinks, syrups, ketchups, milk etc. 2) Jars wide mouthed bottles used for foods especially for health drink powders- Horlicks, Complain etc. 3)Vials & ampoules- thin walled glass containers used for packaging sensitive drugs. A vial for injectables has a very tight rubber lid at mouth 4)Tumblers- have no necks neither have wide opening, primarily used for jellies, jams etc.

Metals metals like steel & aluminum in combination are most commonly used 1)cans- used for packaging soft drinks, are light in weight. Condensed milk, fruit pulps, sea food, bear etc are packaged. 2) Collapsible tubes- these are squeeze tubes used in toothpastes, ointments, shaving creams, cosmetic creams etc. They are made up of aluminums.

Sachets- selling products in small packets-shampoo, hair oil, toothpaste, panmasala etc.

Package size & convenienceReusable containersproviding reusable containers is another way of enhancing product appeal. E.g.Nescafe packaged in glass jars, Dalda containers could be reused in kitchen Refill packs- health drinks, coffee, tea, cooking oils are packaged in refill pack

Economy pack- the economy / family pack makes available the product in larger size. Households with several members can buy the economy packs & avoid the inconvenience of repeat purchase, making a saving

LabelingIt means putting labels on the package Identification- by seeing labels 1 can identify the product. The labels of wellknown products like Intel, Frooti etc. Description- label might describe several things about the product who, when, where it was made. Promotion- promoting the products through attractive graphics.