Product StrategyII

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Product Strategy-II

• SOM 660

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Importance of New Products

• New Products are Critical to the Long-term
  Success of Companies.
• Successful companies in many industries generate
  a large percentage of their total sales from new
  products.
• 50 of sales come from new products among highly
  successful firms.
• Companies spend substantial amounts of money
  developing new products.

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Percent of Sales by New Products Developed in
Last 5 Years
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Factors Affecting New Product Success or Failure

• New Product Failure Rates Vary from 67 to 80.
• Only 2 of new grocery store brands or brand
  extensions reach 100 million in first year
  sales.
• Success is often firm specific as companies have
  their internal criteria for judging success.

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New Product Idea Mortality of PDMA Member Firms
Product Development Managers Association
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New Product Development Process
Idea Generation
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The Commercial Development Process
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New Product Development

• Stages are completed sequentially.
• Opportunity Identification
• Design
• Testing
• Introduction
• Life cycle management.

Approaches

• Classic Linear Approach
• Rugby Approach
• Target Costing Approach

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New Product Development

• New products result from constant interaction
  among interdisciplinary team members. Requires
• Built-in instability
• Self-organizing project teams
• Overlapping development phases
• Multilearning
• Subtle control
• Transfer of learning.

Approaches

• Classic Linear Approach
• Rugby Approach
• Target Costing Approach

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New Product Development

• Product development
• Company determines which segment to target.
• Calculates the target price that buyers are
  willing to pay.
• Feasibility of meeting price is assessed in light
  of desired functionality.
• Costs are carefully controlled to meet target
  price and profit margin.

Approaches

• Classic Linear Approach
• Rugby Approach
• Target Costing Approach (Nissan)

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New Product Development Process

• Concept Screening
• Concept testing
• Data collection
• Surveys, focus groups, or demonstrations.
• Purpose may vary
• Idea screening
• Concept generation or statement refinement
• Concept evaluation.
• Conjoint analysis
• Helps determine how buyers value different.

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New Product Development Process
Idea Generation
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Idea Generation
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Sources of Ready-Made New Product Concepts
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New Service Opportunity Check-List
Criteria
Scale relative size of market
4 -required share l.t. or to 10

ROI
3 -g.t. 10 to 30
2 -g.t. 30 to
50
1 -g.t. 50 competitive structure
4 -few, small competitors
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-many, small competitors
2 - few
competitors, dominated
by one/two large
competitors
1 - many competitors dominated

by one/two strong providers position in
life cycle 4 -
introduction
3 - growth
2 - maturity

1 - decline
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checklist (continued)
criteria
scale barriers to entry 3 -
fewer barriers than opportunities
2 - average
1 - greater
number of barriers market presence
3 - market perceives as strongest provider
2 - market
perceives as average
1 - market perceives as below
average synergistic effect 3
-improves position of other businesses
2 -does not
improve
1 - negatively affects management experience
3 -significant experience in identical service
2
-limited experience
1 - related experience ROI
3 - g.t. hospital
target
2 - to hospital target
1 - less than target
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checklist (continued)
criteria
scale risk/return 4 -
existing market/existing service
3 -new market/existing
service 2
-existing market/new service
1 - new market/new service
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Medtronic Product evaluation Check
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Concept Development Testing
1. Develop Product Ideas into Alternative
Product Concepts
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New Product Development Process

• Concept Screening
• Concept testing
• Data collection
• Surveys, focus groups, or demonstrations.
• Purpose may vary
• Idea screening
• Concept generation or statement refinement
• Concept evaluation.
• Conjoint analysis
• Helps determine how buyers value different.

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Consumer-Goods Market Testing
Controlled Test Market A few stores that have
agreed to carry new products for a fee.
Simulated Test Market Test in a simulated
shopping environment to a sample of consumers.
Sales- Wave Research Test offering trail to a
sample of consumers in successive periods.
Standard Test Market Full marketing
campaign in a small number of representative
cities.
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Commercialization
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Prerequisites for product success

• Top management direction
• Proper organizational fit
• Meaningful product differences
• Proper positioning
• Proper timing

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Why New Products Fail

• Over Championing
• Overestimated Demand
• Poor Design
• Poor Marketing Execution
• High Development Costs
• Strong Competitive Reaction

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Positioning is the act of designing the companys
offering and image to occupy a distinctive place
in the the target markets mind.
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Positioning sequence

• Analyze product attributes which are salient to
  the customer
• Examine distribution of attributes among
  different segments
• Determine optimal position for the product with
  regard to the attribute, taking into account
  positions occupied by existing brands
• Choose overall position for brand

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Single brand positioning

• Company must associate itself with core segment
  in the market where it can play a dominant role
• Or, consider market undifferentiated and cover it
  with a single brand (risk is competitors niching
  brand)

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Prerequisite for single brand positioning success

• Brand must be positioned to withstand competition
  from toughest rival
• Unique position should be maintained crating aura
  of different product
• (VW successful as small entry for several
  years)

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Positioning multiple brands
Multiple brand logic

• Seek growth by offering varied brands to multiple
  segments (coke, Phillip Morris)
• Avoid competitive threats to different brands

Key Concern Cannibalism
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Product repositioning

• Competitive entry causing adverse effects
• Consumer preferences undergo change
• New customer preference segments identified
• Mistake on original positioning

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Repositioning alternatives

• Reposition among existing customers (3-M post it
  notes, General Foods for jello as salad base)
• Reposition among new users (Millers from
  Champagne of Bottled Beer to Miler time to
  Genuine Draft)
• Reposition for new uses (Arm Hammer Baking Soda)

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