Product development

Prof. Jogendra nayak

Product

• Core : generic product eg. A forklift

• Tangible: physical addition or deletion

• Augmented: additional benefits

Factor Consumer Industrial

Product quality Important ; at times overshadowed by price or promotion

Very important

Specifications General; occasionally customized

Designed to specifications

Aesthetics Colour, shape etc are important Not important

Packaging Protective and promotional Mostly protective

Branding Only product’s brand name Product and company brand name

Time for brand building

Less time Long time; satisfactiory association is required

Support/assurance Less complex network of brand beliefs

Involves more complex network of relationships beyond pro

Product uses Consumption Production

New product failure rate

80% or more 30-40%

Innovation adoption Depends on the innovativeness of consumer and competitor

Depends on the innovativeness of buying firm as well as that of its consumers and competitors

New industrial productBooz, Allen & Hamilton

1.New product lines: help a co. to enter into an established market

2.New to the world products3. Improvements/revisions to existing products:

helps in replacing existing ones4.Addition to existing product lines: supplements

existing ones5.Cost reductions: similar performance at lesser

costs6.Repositioning: existing products targeted to new

markets

Product line strategies

• Reaction to competition

• Market gaps

• Image

• Pressure of sales people

• Capacity utilization

• Desire of top mgt

Causes of poor product performance

Reasons no. of companies citing• Uncompetitive price 7• Production problems 6• Not mass product, uneconomic batches 6• Too costly to produce and market 5• High costs to manufacture 5• Overengineered 4• Competitors dominated the market 4• Customers requirement not as expected 2• Low selling price 2

PRODUCT EVALUATION CRITERIA

A. MARKET SIZE

Present size, growth potential, amount of competition, present channels suitable, variety of end uses known, technical service required.

B. PRODUCT / TECHNOLOGY CRITERIA– Degree of innovation, lead time, patentable

product/processes, estimated product life cycle, technical feasibility, competing technologies

C. FINANCIAL CRITERIA• Initial investment, ROI, profit/sales ratio, expected cash

flow, payback period.

PLC 1 2 3 4 5

Strategy/objective

Minimize learning requirements develop widespread brand awareness

Establish strong market position

Maintain/ strengthen market niche

Defend position against competition

Milk the offer dry

Product strategy

Limited models Design to facilitate new segment and new use systems

Intensify product development

Alert for cost improvement, penetration pricing

Prune line of items not returning profits

Price High trade discounts

Aggressive promotional pricing strategy

Broaden promotional pricing strategy

Defensive pricing

Maintenance pricing

Promotional strategy

Create awareness Strengthen brand preference

Strengthen dealer ties

Maintain trade loyalty

Phase out

Distribution

Exclusive/ selective/ high distributor margins

Intensive/ rapid resupply of distributors

Intensive/ extensive/ keep dealers well supplied at min. inventory costs

Intensive/ extensive/ keep dealers well supplied at min. inventory costs

Phase out

STAGES IN THE NPD

• Idea generation• idea evaluation• concept development• marketing strategy• business analysis• sales estimation• Test marketing• prototype development