UNIT V. Developing New Products PDF

UNIT V. DEVELOPING NEW PRODUCTS Time Allotment: 9 hours General Objective: In this unit, the learner is expected to appreciate the business decision process involved in developing new products and test-marketing these products/ services to the target market. Specific Objectives: At...

UNIT V. DEVELOPING NEW PRODUCTS Time Allotment: 9 hours General Objective: In this unit, the learner is expected to appreciate the business decision process involved in developing new products and test-marketing these products/ services to the target market. Specific Objectives: At the end of the unit, the learner should: 1. know how to generate new product ideas 2. learn the process of test-marketing the idea and the product before introducing them to the market 3. understand the business decision-making process in developing and testing new products Overview Your company has probably developed a number of long-standing products orservices— offerings that have been in the marketplace for a while. But most likely, italso develops new offerings on a regular basis. In fact, for many companies, successhinges on the ability to continually create innovative products and services. Why new products or services? As you know from your own day-to-day personal and business life, companies arealways offering new products and services—whether it's a new camping backpack withhandy features, an easier way to pay your bills electronically, or an innovative database management tool. Consumers like to have new choices, and successful companies constantly research and create new products to satisfy these desires and to build sales. But continually coming up with new offerings is important for other reasons as well: Consumers are often fickle creatures—their attitudes toward existing products can change quickly and unexpectedly. Most products have a natural life cycle and eventually become outdated. Your competitors are also looking for ways to offer bigger and better deals to customers. In most businesses, companies are under pressure to constantly come up with either entirely fresh offerings or improvements on existing products. Yet new offerings, in particular, fail at an astounding rate. In fact, 80% of recently launched products are no longer around! Products fail for many reasons; for example,product-development costs may prove higher than a company expected, or competitors fight back more fiercely—or numerous other surprises pop up to foil the plan. What's the best way to make your new or improved product or service as successful as possible? Generate and test good ideas, then develop effective marketing programs for the most promising-sounding ones. Generating new product ideas Start generating new product ideas by asking customers what they need and want, or what they're unhappy about. For example, a kitchen supplies company discovered that customers using the company's scrubbing pads didn't like the fact that the pads scratched their expensive cookware. The company acted on this new knowledge—and developed a no-scratchsoap pad. Note: Good ideas don't necessarily always come from customers. Consumers may not be aware of the available product or service possibilities, or they may not know how to articulate their needs or concerns. Still, any product idea will succeed only if it ultimately solves a consumer problem, fulfills consumers' needs, or meets their approval. Other sources of new ideas include: your competitors ABM 67 Agribusiness Marketing Management HESoliven 1st semester 2024-2025  your company's own employees industry consultants and publications market-research firms Consider using all these resources, in addition to customer feedback, to brainstorm as many ideas as possible. Testing your ideas Once you've generated ideas for new offerings, determine whether the ideas are compatible with your company's overall strategies and resources. Screen out any ideas that don't fit these criteria. For example, if your firm specializes in expensive office furniture, ask how strongly an idea for a new desk chair might support this strategy. And decide whether the company can afford to develop and launch such a product. If your new product ideas fit with your company's strategic plan, then test the product idea by presenting the concept to target consumers—perhaps in a focus group or through a mail-in questionnaire—and get their reactions and ideas. Depending on the product,you can create a physical model, or prototype, to show consumers. Or, you can use computer-aided design and manufacturing software to demonstrate the idea. Test-marketing the new product Once you've decided on a new product, the next step is to test it in the market.Test- marketing lets you gauge whether the product is technically and commercially sound and how enthusiastically target customers may embrace the product. You test market both consumer and business goods. Test-marketing consumer products. To test consumer goods, you can use one or moreof the methods below. They range from least to most costly, and your firm can hire companies that specialize in conducting and evaluating any or all of these tests. First, develop samples of the actual product. You'll dress these samples up with a brandname and packaging and then test them in authentic settings, with flesh-and-bloodcustomers. The sales wave: Let some consumers try the product at no cost. Then reoffer theproduct, or a competitor's product, at slightly reduced prices. See how many customers choose your product again, and gauge their satisfaction with it. Simulated test marketing: Ask a number of qualified buyers to answer questions about their product preferences. Then invite them to look at a series of commercials or print ads that include one for your new product. Finally, give them some money and set them loose in a store. See how many of them buy yourproduct. Controlled test marketing: Place your product in a number of stores and geographic locations that you're interested in testing. Test different shelf positions,displays, and pricing. Measure sales through electronic inventory control systems. Test-market: This is test-marketing on a grand scale. Select a few representative cities, get your sales force to give the product thorough exposure in those cities, and unleash a full advertising and promotion campaign. See how well the product sells. Test-marketing business products. To test business goods, use these methods: Alpha testing: Build a few units of the new product. Then carefully select a couple of your most important and friendliest customers to try the product for free and comment on its functionality, features, and problems. You might make sure that a representative from your firm accompanies the unit to the alpha-testingcustomer and "walks" them through the testing process. Your goal at this point is to collect loads of advice for making the product the best it can be. Beta testing: This resembles alpha testing, except that it's done a bit later in the product- development process—when the product is somewhat closer to its final form. With beta testing, send more units out to more customers for their feedback than you did with alpha ABM 67 Agribusiness Marketing Management HESoliven 1st semester 2024-2025  testing. You might have a more specific list of concerns or issues that you want testers to think about as they use and experiment with the product. And, you might actually offer to sell testers the product at a big discount. Trade show exhibits: Observe how much interest participants show in the product, how they react to various features, how many express clear intention of buying the product or placing an order for it. Note, though, that your competitors will also get a look at your product at trade shows. Therefore, it's best to launch the product soon after the show. If your test-market results are positive—that is, it looks as if there's real interest in your product—you can feel more confident about actually commercializing the product—proceeding to manufacture and distribute it—all within your marketing plan. The figure below shows the decision process that most firms use to develop and test new products. Idea Generation Poor-drop Good- fulfills customer need Idea Compatibility Poor strategic fit - drop good Concept poor- drop orDevelopment rework good Product Marketing Plan poor- drop or rework good Market Testing poor- drop or rework positive response poor- drop Rollout or rework positive Profitability poor- drop or rework good- objective achieved! Source: Philip Kotler, A Framework for Marketing Management (Upper Saddle River, NJ: Prentice Hall, 2001). ABM 67 Agribusiness Marketing Management HESoliven 1st semester 2024-2025  Learning Activity F: Writing a Product Profile Instructions: In your group, use this form to capture essential planning and control information of your proposed product. You can adapt categories to fit service or program offering. Product Profile Product Name: Date of Launch: Product Number: Current Version: Product Manager: Product Line: Phase in Product Life Cycle: (check the one that applies most closely) New Product Growth Phase Mature Phase Decline Phase Manufacturing Assembly or Development Site Product Positioning Target Market(s) or Segments Key Product Features Key Product Benefits 1. 1. 2. 2. 3. 3. Breakeven Selling Point Pricing Strategy (Consider cost, competition, customer’s demand and perceived value) Key Competitors Average Selling Price Marketing Strategy 1. 2. 3. 4. 5. Market Demand for Product Distribution Projected Annual % of Total Revenue Year to date % change Channel Revenue Revenue Current market share Last Year: % Increase or Decrease Marketing Objective Promotional Strategy Media Plan: Ad Agency Name Contact Account Executive: information: Publicity Strategy: Publicity Manager: Contact information: Special Offers: ABM 67 Agribusiness Marketing Management HESoliven 1st semester 2024-2025