lecture 10 (new products)

8/8/2019 Lecture 10 (New Products)

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New Products


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9-2

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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9-3

What are new products????


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9-4

New Products

Product Modifications

Line extensions

Brand extensions

Really new products


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9-5

Branding

NewBrands

Multibrands

Brand ExtensionLine

Extension

Existing New

PRODUCT CATEGORY

BRAND

NAME

New

Existing


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9-6

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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9-7

Brand Extension

Existing brand names are extended tonew or modified product categories.

Virgin Atlantic

Virgin Mobile

Virgin Cosmetics

Virgin Trains

Virgin Money

*

*

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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9-12

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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9-14

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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9-20

a e s ar e

Why should laboratory and safety tests be

done?


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9-21

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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9-22

Evaluating Really New Products

1. Relative advantage

2. Compatibility

3. Risk

4. Complexity

5. Observability/communicability

6. Trialability/divisibility


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9-23

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?

lecture 10 (new products)

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