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PRODUCT STRATEGY AND NEW PRODUCTDEVELOPMENT
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MANAGING
THE PRODUCT
MANAGINGTHE PRODUCT
LIFE CYCLE
NEW PRODUCT
DEVELOPMENT PRODUCT
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Major objectives
(i) To ensure that the product-mix is in line with the overall
company and marketing objectives
(ii) To evolve guidelines for reviewing the performance of
the existing products by using such factors as, sales,profits, competition and customer acceptance
Based on these objectives,
the product strategies are
decided
--- which existing products should be continued, or
modified or dropped
--- which new products need to be developed
Introduction
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Basic
Properties
Enhancedproperties
Augmented
properties
B2B Product
Basic properties are included in the generic
product, with fundamental benefits sought
by the customer
Generic products are made differentiable
by adding tangible enhanced propertiessuch as product features, styling, and
quality
The augmented product includes intangible
benefits such as technical assistance,
availability of spare parts, maintenance and
repair services, warranties, training, timelydelivery, and attractive commercial
payment terms.
Cummins India Ltd. Has a successful product strategy because it has understood
the customers perception and offered both tangible and intangible benefits tothe target industrial customers far superior than the customers.
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CHANGES IN PRODUCT STRATEGY
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Factors demanding changes in product strategy
Customer
needs
Technology
Government
policy/laws
Product life-
cycle
Making changes in the product in line with the changes
in customer needs
E.g. Increased cost of land leading to restructuringstores to increase stacking levels
Changes in technology can require either product
modification or making existing products obsolete
E.g. The jelly filled telecom cables are getting replaced
by fibre optic telecom cables.
Many companies have changed over from main frame
computers to PCs to Laptops
Change in government policies and laws enacted by
Indian Parliament requires change in product strategy
E.g. Policy of liberalisation permitted private sector toenter various sectors original reserved for public
sectors.
In order to maintain growth in sales and profits,
industrial firms decide to drop, modify or develop new
(substitutes) products when the existing products
reach matur i ty or decl ine stages in product life-cycles
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NEW PRODUCT DEVELOPMENT
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Classification of New Products
(i) Products that are innovative and new to the world
(ii) Products that are new to the Company but not new to the market
(iii) Revision or improvements to the existing products in the
existing markets
(iv) Addition to the existing product lines with additional markets
(v) Repositioning existing products to new market segments
(vi) Product with substantial cost reductions without reduction inperformance
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Factors responsible for Success and Failure of New Industrial Products
Product not
satisfyingconsumer needs
Resulting from an inadequate coordination between R & Dand Marketing (marketing research) functions
Product not
significantly
different
They are similar and perhaps imitations of the existing
products
FAILURE :
Product do not
deliver expected
performance
Products fail to meet the expectations due to poor design
Weak
development
process
Competitors copy their products but have superior quality
and marketing effectiveness
Prices are much
higher thanvalue perceived
This might be because the companies want to recover the
cost of design, product development and marketintroduction immediately
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Factors responsible for Success and Failure of New Industrial Products
Product
superiority &
uniqueness
Superior quality and new product features that give the
product substantial competitive advantage
Market
knowledge
The company understands the needs and wants of target
markets. Defines the same at the product concept stage ofthe new product development process, and translates this
knowledge into marketing strategies and action plans
SUCCESS:
Technical &
production
capabilities
They are required to translate the product concept into
product development and commercial production
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NEW PRODUCT DEVELOPMENT AND MANAGEMENT
STAGES IN NEW PRODUCT DEVELOPMENT
IDEAS GENERATION
IDEA SCREENING
CONCEPT DEVELOPMENT AND TESTING
BUSINESS ANALYSIS
MARKET TESTING
PRODUCT DEVELOPMENT
1
2
3
4
5
6
COMMERCIALISATION
7
8
CONCEPT TESTING
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IDEAS GENERATION
Source
--- Sales persons
--- Customers
--- Distributors
--- Suppliers
--- Design engineers
--- Managers
Attracting good ideas by using techniques such as
Brainstorming Attribute listing
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IDEA SCREENING
To select those ideas which
are likely to succeed
Screening is done in two stages
Stage I
the product is in line with long term
objectives & objectives
resources are adequate to make it
successful
it is useful to customers
it delivers more value
if there is future growth, market size, and
competition in the new product industry
Checking the
product ideas
to ascertain if
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Stage II
Rating of
new ideason
:(A)The relative importance of these factors
by giving weight ages out of a total
weight of 1
B)The management rates how well the new
product is in line with the companysprofile on each factor on a scale of 0.0 to
1.0
(C) Eventually the scores in (A) & (B) are
multiplied to get a total score for the new
product idea
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CONCEPT DEVELOPMENT AND TESTING
After a new product idea passes the
screening stage, the idea should be
developed into a product concept
A product concept is a detailed version of the
product state in meaningful customers terms
The product concept is tested by gettingreaction from customers
The concept that has the strongest appeal from
the customers is chosen
CO C S G
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CONCEPT TESTING
The new product is tested in prospective
customers organization
STERIOLITHOGRAPHY
Creates three computer -generated
three-dimensional plastic prototype .
This techniques is used for small-sized products
VIRTUAL REALITY
In this technique a software
package is used to design the
product on a computer
The CONCEPTS CAN BE PRESENTED BY
DEVELOPING MODELS THROUGH
TECHNIQUES CALLED
BUSINESS ANALYSIS
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BUSINESS ANALYSIS
The purpose of business analysis is to develop
an estimated projection of sales, cost and
profitability in the proposed new product over
the next 5-7 years
The analysis covers aspects like ;
(a) Required investment in plant, equipment, working capital and
market development(b) Market potential sales forecast customer and competitive
analysis
(c) Costs of product development, manufacturing and marketing
the product
(d) Likely price levels, profitability and return on investment
PRODUCT DEVELOPMENT
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PRODUCT DEVELOPMENT
Process in which engineers and technicians
create the desired product
All this is done to ensure that the new products
are developed and launched in the market
before competitors
The R & D department develops one or more
prototypes of the product concept
The development of the prototype will confirm
or negate its ability to produce the productwithin the cost estimate and performance
parameters previously established
In today's competitive environment the success
of the new product depends on how fast it isdeveloped
MARKET TESTING
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MARKET TESTING
Different methods of product testing are
Alfa and Beta
Testing
Alfa testing consists of testing the products internally inthe company
Betatesting is the second stage of testing at the potential
buyers site
Trade showsIntroduce new products at trade shows wher large
number of prospective buyers are exposed to the new
product
Dealers showroom
If the new industrial product is sold through thedistribution channel, it can be tested at their show room
Test marketing
This method is used by certain industrial marketers to
test their product in a limited geographical area through
their sales force in normal market situations
COMMERCIALISATION
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COMMERCIALISATION
Activities include :
Training of sales force Product catalogues
Price lists
Introductory advertisements
Adequate stocks at warehouses/distributors shops
A product is commercialised or launched when
it is introduced to a target market
It involves various activities developed in an
action plan as part of the marketing plan
The marketing activities should be
synchronized with production to ensure market
entry timing
CONCEPTUAL MODEL FOR NEW PRODUCT
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CONCEPTUAL MODEL FOR NEW PRODUCT
DEVELOPMENT
MARKET
SURVEY
DEVELOP
FEATURESDESIGN
FINAL
PRODUCT
TEST
MARKETING
LAUNCHING
CUSTOMER
ATTRIBUTES
ENGINEERING
ATTRIBUTES
FEEDBACK
PRODUCT LAUNCH
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MARKET
TEST
SALES
EXCELLENT
LAUNCH
PRODUCT
SALES
FAIR
ORGANISE NEW
MARKET
TEST
SALES
EXCELLENT
SALES FAIR
SALES POOR
MODIFY
PRODUCT
MARKET
TEST
SALES
POOR
MODIFY
PRODUCT
DROP THEPRODUCT
MARKET
TEST
PRODUCT LAUNCH
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MANAGING THE PRODUCT LIFE CYCLE
PRODUCT LIFE CYCLE
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PRODUCT LIFE CYCLE
SALE
PROFIT
INTRODUCTION GROWTH MATURITY/SATURATION
DECLINE
TIME
SALE &PROFIT
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INTRODUCTORY STAGE
--- Crucial decision is on pricing strategy to be adopted
(i) Market skimming or
(ii) market penetration
--- spend a lot on physical distribution and promotion to create an
awareness and acceptance of the product
Situation
Strategy
There may not be ready market for the product Sales are low
Products undergoes teething troubles
Profit seems a remote possibility
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MATURITY STAGE
SLOW DOWN IN THE GROWTH RATE OF SALES DEALERS MAY DICTATE TERMS
PRICE COMPETITION BECOMES INTENSE
DECLINE CAN BE ARRESTED BY BY IMPROVEMENTS IN PRODUCT AND
PROMOTION
THINK OF NEW PRODUCT MIX.
ELIMINATION OR REDESIGN OF CURRENT PRODUCT
Strategy
Situation
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DECLINE STAGE
DECLINE MAY BE SLOW OR RAPID
MAY BE DUE TO BETTER SUBSTITUTES,BETTER COMPETITION,
TECHNOLOGICAL ADVANCES
CONSIDER ELIMINATION OF SUCH MARGINAL OR UNPROFITABLE PRODUCTS
LAST RESORTREDUCE THE PRICE TO PROP UP THE PRODUCTS SALES
Situation
Strategy
OPTIONS IN DECLINE STAGE
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OPTIONS IN DECLINE STAGE
1) IMPROVE PRODUCT QUALITY
2) ADD NEW PRODUCT FEATURES RESULTING IN EXTRA BENEFITS
3) PENETRATE NEWMARKET SEGMENTS
4) GIVE INCENTIVES TO DISTRIBUTION CHANNELS
5) EXPAND THE NUMBER VOF DISTRIBUTION CHANNELS
6) IMROVE ADVERTISING AND SALES EFFORTS
PLC as a concept as a tool in formulating and implementing Marketing Strategy
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PLC asa concept as a tool in formulating and implementing Marketing Strategy
---- Facilitates pre-planning the product launch
---- Facilitates prolonging the profitable base
---- Facilitates investment decisions on products
---- Facilitates choice of appropriate entry strategy
---- Facilitates choice of right time to exit
---- Provides useful clues for managing customers