B2B Product Decisions, New Product Development.ppt

8/10/2019 B2B Product Decisions, New Product Development.ppt

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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

B2B Product Decisions, New Product Development.ppt

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