Chapter 1 DEVELOPMENT & NEW PRODUCT MANAGEMENT Amirah Hani Salman Business Administration 135

1. Preparing and launch new development product Companies that fail to develop new product are putting themselves at great risk. Their existing product are vulnerable to changing customer needs and tastes, new technologies, shortened product life cycles, and increased domestic or foreign competition. New product development is risky. But, why new product development should be doing? Because some products / services that are currently produced by the company slow but surely will face downturn stage. That is what the use of research and new products development, in order to keep the company can compensate for the existing competition, Keep the Company from outdate. We know that Times change and needs also changed. There is 6 category or kind of new product:

New to the world product New product that create an entirely new market New product lines New product that allow a company to enter an established market for the first time Additions to existing product lines New product that supplement a companys established product kinds (package size, flavors, etc) Improvement and revisions of existing product New product that proved performance or greater perceived value and replace existing product Repositioning Existing product that are targeted to new market segment Cost reductions New product that provide similar performance at lower cost

Planning a new product can be reached by two ways:

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Acquisition

Company acquisition plan, including research on smaller companies that have attractive product line Patent acquisition, takeover or purchase of rights of new products from the patent holders Acquisition licenses to produce various products

Development

Running new product development by forming a research and development division The development of products with the contract (ask researchers / or independent agency in order to prepare everything about particular product development for the company

Several factors that hinder new product development:

Shortage of important ideas in certain areas Fragmented market Social and governmental constraints, new product have to satisfy consumer safety and environmental concerns. Government requirements slow down innovation in drugs, toys, and some other industries Costliness of the development process, company has to generate many ideas to find just one worthy of development. Furthermore, the company often faces high manufacturing and marketing cost short range to complete the product, some companies with good idea cannot raise the funds needed to research and launch them Shorter product life cycle, when new product is successful, competitors are quick to copy it.

2. Effective organization to support new product

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Build a strong structure organization, company forming a research and development division. 1. Product managers 2. New Product managers 3. New product committees 4. New product departments 5. New product venture teams

Leader management of the company determine the criteria of new products

& how much budget for new product development. They make a border to be obeyed by Research and development division. Research and development

division try to find ideas, concept development, and the way to commercialize new product. Some way to finding new idea... Brainstorming
5W 1H questions

What is the product? Who is the target? When the product will be launch?
3. New Product Deployment

Where is the market? Why we choose that product? How we do that?

Whether a company is launching its first product or one of many, there is a certain procedure for a new product introduction or deployment. Much of the work begins before the product launches. Companies need to have initial feedback from consumers to make sure they are meeting customer needs. There are ways to make sure the proper deployment of new product launch: Timing In commercializing a new product, market-entry timing is critical. The company faces three choices.

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1. First entry, the first company usually enjoys first mover advantages gaining reputational leadership. But, if the product rushed to market before it is thoroughly debugged, the product can get a flawed image. 2. Parallel entry, the market may pay more attention when two companies are advertising the new product. 3. Late entry, the competitors product may reveal fault the late entrant can avoid. The company can also learn the size of market. Geographic Strategy Different place, different needs. The company must decide the right place to deploy the product. Target Market Prospect Company must target its initial distribution and promotion to the best prospect groups. Testing Product Concept A product comes with ideas about how it will look, taste or feel, depending on the nature of the product. Ask consumers if they like the product and determine their possibility of purchasing it. Production Company should determine how to produce it, also determine how many units of the product that will need. Accomplish this by studying secondary research on the sales of competitive brands. Packaging, Pricing & Promotion Design the package of new product. Make use of designs or colorful schemes that will attract attention. Based on research, price product according to the price elasticity of the market. Allocate and train your sales representatives for the new product launch. Determine advertising mix: Television, print, in-store promotions, Internet marketing, etc. 4. Consumers Acceptance Process

In this stage company analyze about Consumers learns about new products, try them, and adopt / accept them or reject them. Adopter of new products has been observed to move through five stages: Awareness, the consumers becomes aware of the innovation but lacks information about it.

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 Interest, the consumers is stimulated to seek information about the

innovation. Evaluation, the consumers consider to try the innovation. Trial, the consumers tries the innovation to improve his or her estimate of its value. Adoption, the consumers decides to make full and regular use of the innovation.

Personal influence or word of mouth plays a large role to influence consumer acceptance process. Examples: There is a new product in the market, its a kind of baby diaper with unusual shape. A mother is interest about it, but doubt to buy it for her baby because she worry that her baby will not suitable with that new diaper. And then she meets her friend, who is also a mother then her friend tells her about new diaper that she felt interest in the market. Her friend tells that she use that diaper and so on, then recommended it to a mom. Mom, finally sure to try that diaper.
5. Product Life Cycle

Company need to manage the new product through the introductory, growth, maturity and decline stages. In the beginning, company will be spending more on advertising. The product may not turn a profit in the first year because of all the start-up costs. As company sales volume grows, company can increase the distribution. Also Increase advertising and continue to find ways to reach companys key target market. There are four main stages of a product's life cycle and their characteristics are:
1) Market introduction stage

The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is working. Limited numbers of product are available in few channels of distribution. costs are very high slow sales volumes to start little or no competition demand has to be created customers have to be prompted to try the product makes no money at this stage

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2) Growth stage

Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilize. costs reduced due to economies of scale sales volume increases significantly profitability begins to rise public awareness increases competition begins to increase with a few new players in establishing market increased competition leads to price decreases
3) Maturity stage

Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilize. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and uses a greater variety of media. costs are lowered as a result of production volumes increasing and experience curve effects sales volume peaks and market saturation is reached increase in competitors entering the market prices tend to drop due to the proliferation of competing products brand differentiation and feature diversification is emphasized to maintain or increase market share Industrial profits go down
4) Decline stage

At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting. costs become counter-optimal

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 sales volume decline

prices, profitability reduce

profit becomes more a challenge of production/distribution efficiency than increased sales

6. Marketing Strategy at Product Life Cycle Introduction Stage During the introduction stage, the primary goal is to establish a market and build primary demand for the product class. The following are some of the marketing mix implications of the introduction stage:

Product - one or few products, relatively undifferentiated Price - Generally high, assuming a skim pricing strategy for a high profit margin as the early adopters buy the product and the firm seeks to recoup development costs quickly. In some cases a penetration pricing strategy is used and starting prices are set low to gain market share rapidly. Distribution - Distribution is selective and spread as the firm commences implementation of the distribution plan. Promotion - Promotion is aimed at building brand awareness. Samples or trial incentives may be directed toward early adopters. The opening promotion also is intended to convince potential resellers to carry the product.

Growth Stage During the growth stage, the goal is to gain consumer preference and increase sales. The marketing mix may be modified as follows:

Product - New product features and packaging options; improvement of product quality. Price - Maintained at a high level if demand is high, or reduced to capture additional customers. Distribution - Distribution becomes more intensive. Trade discounts are minimal if resellers show a strong interest in the product. Promotion - Increased advertising to build brand preference.

Maturity Stage During the maturity stage, the primary goal is to maintain market share and extend the product life cycle. Marketing mix decisions may include:

Product - Modifications are made and features are added in order to differentiate the product from competing products that may have been introduced. Price - Possible price reductions in response to competition while avoiding a price war.

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Distribution - New distribution channels and incentives to resellers in order to avoid losing shelf space. Promotion - Emphasis on differentiation and building of brand loyalty. Incentives to get competitors' customers to switch.

Decline Stage During the decline phase, the firm generally has three options: Maintain the product in hopes that competitors will exit. Reduce costs and find new uses for the product. Harvest it, reducing marketing support and coasting along until no more profit can be made. Discontinue the product when no more profit can be made or there is a successor product. The marketing mix may be modified as follows:

Product - The number of products in the product line may be reduced. Rejuvenate surviving products to make them look new again. Price - Prices may be lowered to liquidate inventory of discontinued products. Prices may be maintained for continued products serving a niche market. Distribution - Distribution becomes more selective. Channels that no longer are profitable are phased out. Promotion - Expenditures are lower and aimed at reinforce the brand image for continued products.

7. Market Evolution Like Products market evolve thru four stages: Emergence, Growth, Maturity & Decline. Emergence Stage Company has a problem to design an optimal product. Option-1: (Niche strategy) Designed to meet one of the corners of the market. Option-2: (Multiple niche strategy) Two or more products simultaneously launched to capture two or more parts of the market. Option-3: (Mass market strategy) New product designed for the middle of the market. If pioneer firm is large and designs its product for mass market, it is the beginning of emergence. For small firms single niche strategy makes sense. Resource limits. A large firm may opt for mass marketing. A product in the middle minimizes total dissatisfaction. Growth stage
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If the product sells well then new company enter the market. Maturity Stage Eventually competitors cover and serve all the major market segments. Maturity Stage Growth slows down. Decline Stage Demand will decline & decline starts. In this, the old technology will eventually disappear and a new life cycle will emerge.

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