Product&Brand Mgt
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Transcript of Product&Brand Mgt
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Product and Brand Management
MODULE-I
1. THE CONCEPT OF NEW PRODUCT:-
A product may be new to the company, but not to the customersand in reverse a product may be new to the customers but notto the company.
And basing upon these simple concepts, Booz, Allen andHamilton identified six categories of new products in terms oftheir newness to the company and to the marketplace, as below-
a. New to the world : New products that create an entirelynew market.
b. New product lines : New products that allow a company
to enter an established market for the first time.c. Additions to the existing product lines : New products
that supplement a companys established product line.d. Improvements in Revision to existing products : New
products that provide improved performance or greatervalue and replace existing products.
e. Repositioning : Existing products that are targeted tonew market segments.
f. Cost reductions : New products that provide similarperformance at lower cost.
2. WHY NEW PRODUCTS FAIL?
Because:-a. Inadequate Market Analysis.b. Product deficiencies.c. Higher costs than anticipated.d. Poor timing of introduction of new products.e. Severe competition.f. Insufficient marketing efforts.g. Inadequate sales force.h. Weakness in distribution system.
3. NEW PRODUCT DEVELOPMENT PROCESS:-
STEP1:
IDEA GENERATION
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STEP2:
STEP3:
STEP4:
STEP5:
STEP6:
STEP7:
STEP8:
TEST MARKETING
MARKETINGSTRATEGY
DEVELOPMENT
COMMERCIALIZATION
PRODUCTDEVELOPMENT
CONCEPT TESTING
IDEA SCREENING
BUSINESS ANALYSIS
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YES YES YES YES YES YES YES
1.IDEA
GENERATION
- Is the idea
worth
considering?
2.IDEA
SCREENING
- Is the
product idea
compatible
with company
objectives,strategies and
resources?
3.CONCEPT
TESTING
-Can we
find a good
concept for
the productthat
consumers
say they
would try?
4.MARKETING
STRATEGY
DEVELOPMENT
- Can we find
a cost
effectiveaffordable
marketing
strategy?
5.BUSINESS
ANALYSIS
- Will this
product
meet our
profit goal?
Should we
send the idea
back for product
development?
7.MARKET
TESTING
- Have our
product
sales met
ourexpectation
s?
Would it help to
modify the
product or marketing
program ?
8.COMMERCIALIZATION
- Are our product
sales meeting our
expectations?
IF YES LAY
FUTUTE PLANS
REGARDING
6.PRODUCT
DEVELOPMENT
- Have wedeveloped a
technically
and
commercially
sound
product?
DROP
N
O
N
O
N
O
N
O
N
O
N
O
N
O
N
O
N
O
N
O
YE
S
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STEP1: IDEA GENERATION
It is a continuous process, which is a systematic search for new product opportunities.Otherwise, this step is known as opportunity exploration.
Methods of generating ideas include brainstorming, focus group, analysis of existingdata on products and survey. Other sources include seminar & conferences,
advertising agencies and marketing research firms.
STEP2: IDEA SCREENING
As ideas emerge, they are checked against the firms new product goals and longrange strategies.
Today many companies following checklists for preliminary evaluation. In it, firms listthe new product attributes considered most important and compare each idea withthose attributes.
- In screening ideas, the company must avoid two types of errors, suchas-
DROP ERROR: - It occurs, when the company dismisses a goodidea.
GO ERROR : - It occurs, when the company permits a poor ideato move into development and commercialization.
- These errors may lead to three types of failures, such as-
1. An absolute product failure: - Losses money. Here sales dont covervariable cost.
2. A partial product failure : - Losses money. But, Here salescover variable costs and fixed costs.
3. A relative product failure :- Yield a profit that is less than thecompanys target rate of return.
STEP3: CONCEPT DEVELOPMENT & TESTING
Attractive ideas must be refined into testable product concepts; in consumer terms.Again concept testing determines customer attitudes before product development.Concept testing is a quick and inexpensive way of measuring consumer enthusiasm.Where, the following questions are arises-
a. Is the idea easy to understand?b. Do you perceive distinct benefits for this product over those products
currently in the market?
c. Do you find the claims about the product believable?
d. Would you replace your current brand with this new product?
e. Would this product meet a real need?
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f. What improvements can you suggest in various attributes of the concept?
g. How frequently would you buy the product?
h. Who would use it?
STEP4: MARKETING STRATEGIES DEVELOPMENT
The planner must now develop a marketing strategy plan for introducing the productinto the market.The marketing strategy formulation takes place in three parts, like-
a. The first part: describes the size, structure and behaviour of target market,the planned product positioning and the sales, market share and profit goalssought in the first few years.
b. The second part outlines the products planned price, distribution strategyand marketing budget for the first year.
c. The third part describes the long run sales and profit goals and marketing
mix strategies.
STEP5: BUSINESS ANALYSIS
It involves the detailed review and projection of relevant market factors, revenues,costs and tends for a proposed new product.
Example: Demand projections, Cost projections, completion, Requiredinvestments and profitability.
STEP6: PRODUCT DEVELOPMENT
If product development passes through the business test, it moves to themanufacturing department to convert it into the physical product shape.
Product development decisions include the types and qualities of materials, themethods of production, cost and production time requirement per unit, alternativesizes, colours, brand and trademarks, etc.
STEP7: TEST MARKETING
If the product passes functional and consumer tests, the next step is the testmarketing.According to Phillip Kotler, test marketing is the stage at which the product andmarketing program are introduced into more realistic market settings.Test marketing involves placing a fully developed new product for sale in one or moreselected areas and observing its actual performance under a proposed marketingpan.The purpose is to evaluate the product and pretest marketing efforts in a real settingprior to the commercialization.
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Test marketing process requires the decision making on when, where, how long &what information to acquire.Test marketing allows the marketer to see the feasibility of product in the real testconditions. So there is always a scope for correction. So many products fail aftercommercialization, because of lack of test marketing by the marketer.
STEP8: COMMERCIALISATION
After the successful test marketing of the product, the company is ready to introducethe product in its target markets. It is called as commercialization.
In the commercialization stage, the following factors are to be considered-
a. Acceptance by customers and intermediaries.b. The intensity of distribution (i.e. how many outlets?)c. Production capabilities.d. Promotional mix.e. Competitions.f. Price.
g. Break Even Point.h. Time Period profitability occurs.i. Cost of commercialization.
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RESEARCH TECHNIQUESand STRATEGES USED IN
NEW PRODUCT DEVELOPMENT PROCESS
I. IDEA GENERATION
Research studies on the consumers, products, competition, etc. will revealmarket gaps by comparing the existing supply of products with the idealproduct conceptions of consumers.
There are many techniques for concept or idea generation, such as -A- Need Assessment (What does the Customer/company want?)-B- Scenario Analysis (Futuristic Forecasts)-C- Group Creativity (Group Innovation)
-D- Attribute analysis (Mechanical approach for obtaining newviewpoints)
-E- Relationship analysis (Force to see new relationships)-F- Lateral Search (Move away from the product)
-A- Need Assessment
This category of techniques involves understanding current and future needs ofthe marketplace.
And they are-
-a- Customer visit.-b- Focus groups.-c- Using experts service.-d- Publications.-e- Role playing.-f- Lead User methodology.
-a- Customer visit :-
The purpose of customer visit is not to sell customers on the companysproducts but rather to listen to what customers are saying about
what they need.
- Set objectives.- Select a sample.- Compose the visit team.- Develop the discussion guide.- Conduct the interviews.- Debrief after each interview.
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- Analyze, report and store visit data.
-f- Lead user methodology:-
This technique attempts to analyze the needs and wants of lead users.
The steps in this method are as follows - Specify product market segment.- Identify trends.- Identify lead users.- Develop new product specifications with lead users.- Test lead user product concept with routine users.
-B- Scenario Analysis (Futuristic Forecasts):-
Here the attempt is to describe the futuristic scenario and frame potentialproblems emerging from this scenario. And, consequently, new product ideascan be envisioned to solve these problems.
Again it is of two types
- Extend Approach:--means to analyze present then future facts and scenarios one by one
briefly to find out the actual problems.
- Leap Approach:--means to analyze those types of products on the basis of a limited gap
periods, i.e. after 5 years
-C- Group Creativity (Group Innovation)
Other wisely known as Brainstorming
This comprises those techniques that stimulate groups to think of new ideas.
Guidelines for brainstorming
- Defer judgment:- means all ideas need to be welcomed & initial criticismof original ideas are inappropriate.
- Quantity breeds quality:- means the more ideas, the better objective is toput forth all ideas.
Rules of Brainstorming
- Brainstorming works best in a small group of 4 to 10 people.
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- A target is required. That is, there must be a single defined question oritems on which to focus that everybody understands.
- All suggested ideas are publicly recorded; none are edited out.
- Equal opportunities for all group members to express themselves must beensured.
- All possible answers should be encouraged and actively sought out,including the impractical, wild or out-in-left-field ideas.
- Keep going around the team until all ideas are collected andrecorded.
-D- Attribute analysis (Mechanical approach for obtaining newviewpoints)
This means to analyze the products characteristics/ attributes to generate newideas.
Three approaches within this category are taken into consideration, such as
- Determinant gap analysis /Attribute Rating (AR)Attributes are known.
Most important attributes/drivers of the market place are selected on thebasis of company or on the basis of customers angle.
A judgmental approach can be taken into account to map existing productofferings with potential product offerings on the given attributes.
- Perceptual gap analysis /overall similarity analysis
Attributes are not known/ not easily found. The methodology here is to pair all existing products & then make an
evaluation of the similarity between the two paired productofferings.
After all pairs have been evaluated, a map is constructed in anattempt to illustrate the relationships among all existing products allexisting products are plotted on the map to show their relationships toevery other product.
- Similarity/Dissimilarity analysis
Here products are evaluated on their similarity/ dissimilarity to eachother, based on a given set of attributes/ characteristics.This analysis is used to group and classify product offering to determine
the competitive nature of the marketplace for existing or potential productofferings.
-E- Relationship analysis (Force to see new relationships)
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is a category of techniques that force relationships between seeminglyunrelated issues to discover new products ideas.
There are 3 types of relationship analysis, such as-
-a- Two dimensional matrix-b- Morphological analysis-c- Trade off analysis
-a- Two dimensional matrix
This approach consists of identifying two key elements in questionconcerning a product.
Example:-
Lets take two different key elements (a type of customers &b- category of services ) to generate some ideas of a product, i.e.
TELECOM SERVICE PROVIDERS
BUSINESS MEN SERVICEHOLDERS
STUDENTS
LIFETIME 1 2 3
PREPAID 4 5 6
POSTPAID 7 8 9
-b- Morphological analysis
A technique that is based on identifying different attributes for a product and
identifying multiple levels for each of the attributes.
Each of the attribute and respective levels are listed, and then each level perattribute is combined with a level from every other attribute to iterate a list ofproduct attribute combinations.
Example:-
If 3 attributes are there and 4 levels( and each level consists of 3 categories )are there then the total possible ideas are = 36
-c- Trade off analysis
As it is not possible to judge which type of attributes and which types of levelsare more preferred by the customers, this type of analysis is required for betterjudgment.
Its a quantitative technique for calculating the desirability of a particularproducts attributes. This, then, can lead to the aggregation of particular typesof attributes that provide the greatest desirability.
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The basic approach here is that all possible product attributes are being takeninto consideration and customers are asked to rank the combinationsaccordingly to their preferences/ desirability. And finally, the best ones withmore samples are taken into considered.
-F- Lateral Search (Move away from the product)
The overall theme underlying here is to force thinking away from the currentproduct offering or attributes to conceive new ideas.
Four techniques are generally overviewed here, such as:--a- Competitors review.-b- Avoidance technique.-c- Big winner technique.-d- Creative stimuli technique.
-a- Competitors review:-
Review of what competitors are doing relative to the productofferings. In this manner product attributes, product offerings, corecompetency and other initiatives that make competitors product popular canbe identified and possibly incorporated into a new product concept.
-b- Avoidance technique:-A technique that constantly challenges team members about whythey think a certain way.In this way the team can understand why certain
preferences exist and how such preferences can best served.
To perform this technique, discussion begins on a particular topic,and then the question why or why not is posed. And this continues
until the team is satisfied with the preferences and corresponding ideasgenerated.
-c- Big winner technique:-
Here, the attempt is to iterate the reasons underlying the success ofproducts, people, things and so on. The technique begins by listing thingsthat are successful to focus discussion. And the discussed reasons are
then tried to incorporated into fruitful ideas/ concepts.
-d- Creative stimuli technique:-
is a technique that brainstorms ideas based on a given adjective ornoun. This technique attempts to content different ways of marking aproduct by reflecting certain elements of a listed word. The key difference
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in the case of the creative stimuli technique is that a word, not a successcharacteristic, is listed and that disconnected words bring about thegreatest creativity.
This type of technique is more successful in generating ideas fornew product offerings.
II. CONCEPT TESTING
After getting feedback about its new product ideas and concept development;concept testing is being done.
Concept testing determines customers attitudes before product development.
Its a quick and inexpensive ways of measuring customer enthusiasms.
Concept testing incorporates customer opinion into the evaluation process.
Other question during a concept test can include reasons why the concept is? oris not Appling? Main strength of the products key weakness of the productconcept and suggestion for improving the proposed product concept Orresearch method.
There are 4 approach for conducting a concept test:-
-A- The narrative concept test-B- The picture / sketch concept test
-C- The prototype concept test-D- The virtual relating concept test
A- The narrative concept test:-Here a test description of the concept being presented to
consumers for their opinions.
B- The picture / sketch concept test:-Here a b/w or drawing is presented to consumers for their for
opinions is presented to consumers for their opinion.
C- The prototype concept test:-Here the consumer is shown and may be able to handle a facsimile
(just copy/ similar product) of the product, sometimes a workingprototype of the product is shown. The consumer, there for witness theproduct firsthand
D- The virtual relating concept test:-Here the consumer views a computer image of the product and may
interact with the virtual prototype.
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III. CONCEPT EVALUATION
Once a set of product concept has been generated an evaluation of eachconcept is conducted.
The purpose of concept evaluation is to refine the set of concept to determinethese that should continue in the product development process.
Five generally accepted approach can be used evaluate concept .In most cases,
these approaches are used together to achieve a border perspective of whichconcept should be continued.
These five approaches are
a). product development character reviewb). concept testingc). scoring modelsd). snakes plote). financial Analysis
a). Product development character review
- Here the of executives (responsible for) evaluates the respectiveproduct concept against the criteria established in the PDC
- A product concept that appears to meet the expectationsestablished in the PDC is allowed to proceed in the next productdevelopment stage.
- Ultimately the decision for adopting/not adopting using the PDCreview approach is based on managerial intuition and judgment.
b). concept testing- Discussed Above
c). Scoring models
- These comprise lists of criteria and associated rating scalesthat are generated by the team or established by the company.Each individual product concept is then evaluated on thegiven criteria by using the given scale.
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- Score across the of criteria are summed to provide a total score perconcept.
- Concept with higher scores are given priorities over conceptshaving lower scores.
The 5 points scale are:-
very goodgood
averagebad
very bad
Criterion Concept A Concept B Concept C
Cost to do 4 3 5Profitability 3 2 5
Size of potential market 5 4 4Market share expected 1 3 3Capital investment required 2 1 5
---- ---- ---15 13 22
d) Snakes plot
- Here for each product concept the score per criterion is plotted.
- Therefore, by plotting the scoring profiles of multiple productconcepts a comparison of product concept can be maderegarding which profile is most reasonable or appealing.
- Typically a favorable profile would be one with a more stableprofile so long as an acceptable minimum score is achieve a profilecould also be considered favorable of a product concepthas a higher score on certain desirable criteria.
e). Financial Analysis
There are 2 ways to calculate the financial impact of the product concept.
-I). ATAR model:-
ATAR stands for - Awareness, Trial, Availability and RepeatPurchases.
This approach is typically refers to as a breakdown approach becauseanaggregate market size is broken down by:-
- The percentage of awareness in the market due to promotion. (a)
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- The percentage of trial by consumers. (t)- The percentage of availability in existing distribution channels. (a)- The percentage of consumers who will buy again. (r)
Multiplied by how much will be bought in a given time period. (qb)
So, a t a r qb = ???
-II). ECV Approach:-
- This means - Expected Commercial Values (ECV) Approach.- The specific approach calculates the expected commercial value of
a particular product concept using decisiontree methodology.- This incorporates
- the probability of technical success.- the probability of commercial success.
- to estimate the overall expected commercial worth of a
particular concept.
And the formula for this type of approach is :-
ECV = { (NPV Pcs-C) Pts-D }
Where - ECV = Expected Commercial Value of the product
concept.- NPV = Net Present Value of the projects future
earnings.- Pcs = Probability of commercial success.- Pts = Probability of technical success.- Pts = Probability of technical success.- D = Development Costs.- C = Commercialization costs.
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- The probability of technical success and commercial success canaffect the consideration of product concepts. And this lead to anerroneous ECV calculation. So 4 recommended approaches (asdiscussed) for calculating these probabilities are
- DELPHI Consensus Approach:-
Here, each manager submits his/her probability estimates; whichare then compiled & reported to each of the managers.
Discussion about the numbers usually will take place if thereare significant differences across the estimates, and then,subsequent rounds of probability estimate will ensue. The
process ends when consensus on numbers is reached.
- The MATRIX Approach:-
consists of documentation in two-dimensional matrices that
specify probability of technical success across differentscenarios and probability of commercial success acrossdifferent scenarios.
- The SCORING Model Approach:-
is a more detailed version of the matrix approach. A scoring modelcomprising key criteria are summed and compared to a given
YES
NO
D
C
NPV
COMMERCIAL
FAILURE
YES
NO
TECHNICALFAILURE
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standard score to indicate the probabilities for technicalsuccess and commercial success.
- New PROD Model:-
is an empirically based computer model that is customized to acompany situation.Responses from a team of company representatives answering a
series of 30 questions are loaded into the New Prod computermodel, these data are compared to profiles within the model, andthen, prediction of success or failure is given.
But still there may arise some doubt in this case as because of theapplication of probabilities.
IV. PRODUCT TESTING
- Before going to these tests, there should be a product protocol-which includes the primary questions of whether the productactually works and which factors are to be taken into account for
its success.
OBJECTIVES BEHIND :-
- To assess how far the product fares on the product concept.- To assess the chance of improving the product.- To know what is liked and disliked in a product.- To know preferences after extended usage.
- By definition, a protocol is a signed document containing a record ofthe points on which agreement has been reached by negotiatingparties. A product protocol, therefore, represents the points ofagreement for product specifications and deliverables where all
the departments & management have agreed (on thesespecifications & deliveries).
- Here the protocol of the product is tested.
- The customers are allowed to test the product. Then testing is done.For example How the tea tastes is tested after a consumer takes acup of tea.
- Product testing and concept testing are sometimes donesimultaneously to know whether a product meets the expectations
generated by its concept.
- In general, a product protocol is to address 12 distinct areas, suchas
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1. Target Market:- who is the intended purchaser of the product.
2. Product positioning:- how is the product to be positioned in themarket relative to existing company offerings & competitor
offerings?
3. Product attributes:- describe the technology and form of the
product in specific product functions & attributes/features.
This description is basically technical in nature comprising a metricand a target value.
The metric represents the specific function/feature to be built intothe product and the target value represents the boundary conditions for
building that functions/ features into the product.
There are five ways in which to set target values for metrics - At least X: -These specifications establish targets for the
lower bound on a metric, but higher is still better.EX: - The range for the new bike (metric) must be at
least 90 km/hr.- At most X: -These specifications establish targets for the
upper bound on a metric, with smaller values being better.EX:- The capacity of the tank of a bike can be no more than
14 litres.
- Between X & Y:-These specifications establish both upper & lower bounds forthe values of the metric.
EX: - The no. of pages in a book can range from 400 to 450 pages.
- Exactly X:- These specifications establish a range of a particularvalue of a metric.
EX: - The duration of a new movie must be 2 hrs.
- A set of discrete values:-Some metrics will have values corresponding to several
discrete choices.EX: - CASE sizes for cold-drinks can come in counts of 6 or 12 or
16 or 27.4. Competitive comparison :- What are competitors currently doing?
5. Augmentation dimensions :- How is the product to be differentiated?What is the products competitive advantage?
6. Timing :- What is the product development schedule?
7. Marketing Requirements :- Describe any special marketing issues.
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8. Financial Requirements :- Describe any special financial issues.
9. Production Requirements :- Describe any special production issues.
10. Regulatory Requirements :- Describe any special regulatory/ legalissues.
11. Corporate Strategy Requirements :- What core competencies are to
be emphasized in developing the product?
12. Potholes :- Do there appear to be any foreseeable problems indeveloping the product?
Product Testing :- is therefore, employed to evaluate a products functionalperformance and to examine the product protocol characteristics.- Three specific types of product use testing are possible, such as-
a.- Alpha Testing:- In house testing, where employees serve as the basis fortesting. Its advantage is - it is often less expensive and competitors are nottipped to the new product. But, the disadvantage is that employees may notnecessarily reflect customer views.
b.- Beta Testing:- Here, the basis is customers. The advantage of this testingis - the customer provides insight into the product and its functioning. The
disadvantage is that competitors can learn about the new product and thesample customers choosen for test may not necessarily reflect the total market.
c.- Gamma Testing:- Longer-term test where the product is put throughextensive use by the customer. It is predominantly used by pharmaceuticalcompanies due to regulatory issues surrounding medical drugs.
Structuring a product use :-
This structure contains five testing dimensions as discussed below
a). Test Objectives:- Objectives specifies what the company wants/needsto learn by performing the product use test.
The focus is to test the elements of the product protocol.b). Test Group Characteristics:- which includes test group composition,
mode of contact, company disclosure & degree of product explanation.
- Test group composition:- involves the issue of whether customers/noncustomers should serve as the test group non customers include experts, industryopinion leaders and employees.
- Mode of contact:- includes the choice of mail or personal interaction,individual/group setting, central testing location.
- Company Disclosure:- would pertain to whether users should begiven the company name & the brand.
- Degree of product explanation:- to be given, i.e. full information/half of the information is given to the customers or not.
Degree of product explanation will depend on the objectives of the test.
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c). Product usage consideration:- means the no. of usage exposures to beallowed & duration of each product use experience.Related to this is whether the users experience with the product should besurprised or not.
d). Product form considerations:- means the nature of the product to begiven to users during the test.
Like should the product be the best single product possible? Or Should multiplevariations of the product be provided?
e) Measurement & analysis considerations:- concerns the recording andassessment of test results.One issue is the mode for recording user reactions in paper documentation,audiotape & videotape.Another issue is a designation of norms for the product use test.Final issue is whether measurement & analysis should be performed in-house
or by consulting agency.
V. PRE-TEST MARKETING & TEST MARKETING
Pre-test Marketing:-
Pre-test market analysis is sometimes used in place of a full test market, or todetermine whether test marketing is necessary.
Pretest marketing models are increasingly being used by consumer productsfirms for evaluating new products prior to test market.
The reasons for this are many, but include considerations of cost, risk, andfear of premature competitive disclosure.
Allan Shocker and William Hall discuss the concept of a pretest marketand assess its value. They contrast and critically evaluate most frequently usedmodels for projecting pretest market results. The strengths and limits of thesemodels complement each other and provide useful additions to available methodsfor predicting new product performance and for refining marketing plansprior to test marketing.
Pre-test Marketing Modeling (PTM) are there for practicing , where the objectiveis to convert the readily obtainable information into forecasts of market share or
sales volume and recommend improvements in the product, its pricing andpromotion while introducing new products.
The data collected usually through simulated test markets, the proposedmarketing plan, past experience with the product category and the judgment ofthe executives.
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Basic Structure of Pre-Test Market Models:-
- Use the hierarchy-of-effects model as a good descriptor of customerpurchase behavior.
- Purchase phenomenon broken up into three behavioral stages:
Stage 1 : Awareness of the product given product conceptand marketing mix.
Stage 2: Given awareness the trial percentage.
Stage 3: Given trial, repeat purchase propensity.
Stage 4: Proportion of future category purchases to thenew brand.
The different models of pre test marketing are discussed as under-
SIMULATED TEST MARKET (STM):-
- These are also called Laboratory Test Market.
- Here the Objective is to measure the trial and repurchaseintentions of target market toward a new product as a result of the
proposed marketing plans.
- STMs venue is either a permanent or a traveling lab. These labs arelocated at the shopping centers.
- Respondents are intercepted at the shopping centers.
- There attitudes and usage behaviour toward the product category aresurveyed.
They are exposed to the concept board or commercials for the new
product.They can buy a new product. Non-buyers who are not interested may begiven a sample of the new product as a gift. After they try at home,
say for few weeks/days, they are contracted and their attitudes, use,intention to repeat purchase are surveyed.
STM PROVIDE:-
a. Estimate of percentage of aware consumers who will buythe product.
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b. percentage of triers who will re-purchase.
- There is a relationship between STM results and product performance insubsequent test market and commercialization.
- STM enables us to decide whether further development of the newproduct is warranted by giving us a fairly accurate prediction of themarket share.
- PTM models are further refinements of STM models which convert theSTM data into accurate market share prediction and to simulate effects onshare and profits of the different elements of the marketing mix.
BASES:-- It is model used to make sales predictions at several stages of the new
product development process, e.g. business analysis, test marketing andcommercialization.
- At earlier stages, past data are used for extension based onmanagerial judgment.- At later stages, instead of previous averages, specific product or brand-
centric data are used.
- BASE I :- Consumers are intercepted shopping mall to do concepttest.
BASE II :- In-home test of a product. A good forecasting accuracyis claimed.
BASE III :- It measures the effect of retailing ambience.For ex- self placement, presence of competitive brands,packaging and merchandising materials.The test is not used frequently.
ASSESSOR:-
- It consists of two components.- One is a preference model and other is a trial and repeat model.
STM supports data for these two. It is a dual approach.- Preference model is judgmental and Trial repeat model is based on
choice (behaviour) in the STM.
- Preference Model:-Prior to being exposed to commercials in the STM, respondents areasked to list their consideration set or evoked set of brands fromamong those being tested. They are then asked to allocate a fixed
number of points among the evoked set. It gives relativepreference rating for each product. A follow up telephone call ismade. The respondents are again asked to allocate points amongthe brands, But a new product is included in this time. A market sharecan be estimated from the relative preference for the newproduct and its draw from competitors product can be determinedfrom the change in relative preferences.
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- In the TRIAL REPEAT MODEL - long run steady state market share (S)achieved by a new brand is given by product of long run levels of
trial and repeat purchasing.
S = TRB
where, T = Long run cumulative trial run (the proportion of all
buyers in the target group who ever try the product).R = Long run repeat purchase rate (new brands share of
subsequent purchases in the product category made byprevious triers).
B = The index to adjust the users of buyers of the newbrand relative to other buyers in the category.
LITMUS and NEWS:-- Both these models are a decision process or hierarchy of effects
model.- Awareness is built by promotion.
- There are periodic forecasts of awareness, trial, share and sales andeven profitability.
- While NEWS uses consumer survey data, LITMUS uses STM data toestimate trial and repeat probability to make consumers travel fromawareness to trial and from trial to repeat, whereas NEWS allows
just two.- LITMUS also calculates profitability estimate.
Test Marketing:-
- It is the limited introduction of a product and its marketingprogramme under controlled conditions basically to determine howwell the product will generate sales volume, market share and
profits.
- Thus, it is an opportunity to see how well the product willperform in the actual marketplace.
- Broadly speaking test marketing is the rehearsal of the actualmarketing to be done later on.
- TEST MARKETING PLAN: - It is necessary to design a proper testmarketing plan. Which will help in developing the proper test designand exercise necessary control.
- In general, marketing testing can be done through three types ofcategories of techniques, such as Pseudo scale, Controlled
scale and Full-scale test. These tests are defined under
Pseudo Scale:-
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Here artificial selling situation/hypothetical selling situation iscreated. Thus the actual product is not available for sale.
- These are of two types; such as Speculative sale and pre-markettesting.
- Speculative sales rely on the sales force and are typicallyassociated with business-to-business products. During a speculative sale
situation, a sales person approaches a customer, makes a full
pitch about the product and then sees if the customer would likely buythe product.
- Pre-market testing is typical of shopping mall intercepts, where amarket research firm surveys shoppers at a shopping center
or mall.
Controlled sale:-
- This is the second category of test marketing.- The distinction is that the product is available for purchase in an
exclusive market setting.
- There are basically three types of controlled sale market testingtechniques, such as - informal selling, direct marketing and mini-market.
- Informal selling is typically performed at trade shows, where salespeople can show the product, informally approach customers, makethe pitch and see if the customer will actually buy the product.
- Direct marketing focuses selling efforts on a particular marketsegment or target market; this segment or target market receives
information about the product and has the opportunity topurchase the product.
- In case of Mini-market, only certain stores in a specific geographiclocation sell the product and supported with promotion materials.
Full scale test:-
- This is the third kind of marketing testing technique.- This means actually selling the product in a selective or intensive
distribution environment.- Two types of techniques are mostly adopted here, such as test
marketing and rollout.
- Test Marketing:- Already discussed.
- Rollout:-A rollout is when a subset of the intended target market receives
the product, the company then slowly introduces the new product toother parts of the target market until the entire market is receiving
it.
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In many cases it is geographic in nature, with the smallest regionreceiving the product first, followed by other region in a
predetermined order; often smallest to largest.
V. COMMERCIALIZATION
The lunch/commercialization of a product proceeds in four phases, such as
a). Pre-launch preparation
b). Announcementc). Beachheadd). Early growth.
a). Pre-launch preparation
It comprises the activities that precede the point at which the product isofficially offered for sale in the market.
These activities typically include making preannouncements (public companystatements about the pending lunch of the product), building marketingcapability, establishing service capability, promoting the new product via publicrelations, and filling the distribution pipeline.
Together these activities have the purpose of building excitement and ensuringthat the company is ready to meet market demand.
b). AnnouncementThe second phase is announcement. And it is the point at which the product isofficially offered to the complete market. With the announcement all the decisions arefinalized.c). Beachhead
Its the third step of lunching process.
Here efforts focus on achieving market awareness and generating an initialstream of sales.
d). Early growth
The fourth phase is early growth.
Usually, sales grow as interest in new product grows.
If sales are not growing, a decision needs to be made quickly.
And in general there are five decision options:-
- increase spending- revise the lunch/marketing strategy- revise the product- pull the product temporarily from the
marketplace.- abandon the product.
LUNCH CONTROL PROTOCOL
One tool that is useful during pre-launch preparation is the lunch controlprotocol.
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Like the product protocol on the technical development stage, lunch protocol isused to monitor and control activities during the lunch cycle.
The lunch control protocol Construction can be done through four differentstages as below-
STEP-I:-The potential problems that might occur during a particular products lunch are
identified. And there are three ways to identify such problems, such as - reviewing the situation analysis from the marketing plan to outline
potential threats,- looking at the companys product lunch history to indicate problems
from previous product lunches.- and finally role-playing.
STEP-II:-- To select the problems that should be monitored.- And selection will be done through potential impact of the problems
& commercial success of the product. STEP-III:-
- Design a system for monitoring and controlling each of the selectedproblems.
- And to do this identify a measurable variable that corresponding to theproblem.
STEP-IV:-- The fourth step in lunch control protocol is to develop remedies or
contingency plans for each of the selected problems.For Example
POTENTIALPROBLEMS
TRACKING CONTINGENCY PLAN
Customers are notmaking trialpurchases of thenew product.
Look at point-of-purchase reports. Atminimum, 100purchases per retailoutlet are expected
Install point-of-purchase display.
Overall salesvolume is lowerthan expected
Track monthly unitshipments,shipments less than1000 per monthsignify a problem.
Implement ainstantaneousredeemable couponcampaign.
Competitor hassimilar new product
Difficult to track, butconduct surveyswith retailers andfinal consumers.
Offer two for oneprogram; considerbunding newproduct with otherproducts.
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