CHAPTER NINETEEN DEVELOPING AND ...

CHAPTER NINETEEN

DEVELOPING AND LAUNCHING NEW PRODUCTS.

BY G. A. OKWANDU INTRODUCTJON Product is generally regarded as the most important a-:. perhaps, visible, element of the marketing mix. Several authc: have attempted to provide a definition of product. Kotler (1980: 35"

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defines a product as "anything that can be offered to a market ~:' attention, acquisition, use, or consumption; it includes physics objects, services, personalities, places, organisations, and ideas' In the context of this paper, a product is perceived as anything t>- =:

is capable of satisfying a customer's need or want".

In taking tr :

position. we would further add that a customer's need or want, not static: it changes over time and space. The dynamic nature of human wants and the mode-­ business environment has made it inevitable for managers to acce: as given, that all products have limited life. This fact, commor " referred to as the product life-cycle concept, is an attempt·: recognize distinct stages in the sales and profit history of a procn.r As product sales pass through distinct stages, each present.: ; different challenges to the marketer, the need often arises:: change, drop or modify these products to meet identified custorrs : changing product needs either physically or functionally. This leac: to what is often referred to as product innovation.

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THE CONCEPT OF NEW (INNOVATIVE) PRODUCT Alderson (1957),defines a truly innovative product as one that has features or attributes that satisfy the user's needs in a manner significantly different from an oldp~oduct. Peat et a/(1975), in their study, have remarked that one of the criteria used to define an innovative product is the extent to which consumers perceive it as being significantly new in features and attributes. When we

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talk about new products we do not necessarily imply that the product(s) must be "brand new", using an American terminology

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(Onah and Thomas, 1993). For Onah and Thomas (1993;177-118), a product can be new in a number of ways: (1)

New cost or price

(2)

New conveniences

(3)

New performance

(4)

New availability

(5)

Conspicuous consumption (status symbol)

(6)

Easy credibility of benefits

(8)

Unfamiliar patterns of use, and

(9)

New construction or composition.

(7)

New methods of use

Other ways by which a product can be new, according to the authors, include new market. "If a new market is developed for a product, it becomes new in that market but old in the original market where it was developed.

New appearance, unfamiliar

benefit or different accompanying services could also make a product acquire new status" (p. 119). New Product development

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Firms have varying reasons for developing new products. Ayoola (1994) has suggested a number of reasons. A new product

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could be introduced in order to take advantage of marketing opportunities. Marketing opportunities are potential consumer needsthatare yet to be satisfied. A new product could be introduced to fight competition. This type of product is usually introduced when a major company product is under pressure .from a competitive 'me too' product. The new introduction is usually lower in quality and price. A new product could be introduced with a view to expanding overall market through segmentation. A company may introduce a new product to make use of excess capacity.

In a

situation where there is snortaqe of raw materials, or poor demand for existing products, a company may carry idle capacity. Fixed overhead costs may have to be borne by fewer units oLproducts. This will surely lead to price increases and consequently law demand. The new product will therefore be introduced to utilize idle capacity and therefore ensure profitability of operations. Lastly, a new product couldbe introduced on a tactical basis with a view tousinq up obsolete materials such as perfume, packaging and raw materials. This may lead to cost saving for the company as such obsolete materials could as well be destroyed at great loss (Ayoola, 1994:30).

MANAGEMENT OF NEW PRODUCT DEVELOPMENT

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There is widespread agreement that proper atmosphere and management support are required for a new product programme to be successful, over time. 800z, Allen and Hamilton (1992) have reported that this requires a long-term commitment to growth through new products. ~roduct companies

They found that most successful new

are more likely to tie new product development

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into their strategic plans. This is similar to Quinn's (1985) report that the leaders of large innovative companies have provided a clear long-term vision for their companies.

Booz, Allen and

Hamilton (1981 and 1982) have concluded that new product development should be based on a new product strategy or innovative charter which should: i)

link new products to company objective

ii)

aid the search for new products (i.e. suggest what markets and/or technologies should be investigated, and

iii)

provide general screening criteria. Stanton (1978) has outlined some guidelines for adding a

new product to a company's product line.

He argued that the

question is what time is appropriate for a company to add a new product to its existing product line or assortment. 1.

There should be adequate market demand for the product. This should be the most important criterion to apply to a proposed product. Most times, management starts with the wrong question by trying to find out if the product will fit into. their production system. But the important consideration is what the consumer want, and it is only if the need of the consumer is known that a company can design a product to meet that need.

2.

The product must be compatible with current environmental and social standards.

3.

The production fits into the company's marketing structure. They should consider, among other things, whether the present channel of distribution can be used or a new choice

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has to be made coupled with the capability of the press-: sales force,

4.

A new product idea will be more favourably received if tr::

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item fits in with the existing production facilities, manpowe and management capabilities.

5.

Finally, the product should be able to meet or accomplis­ the company's objective and preserve or enhance compar. image. STEPS IN THE .PRODUCT DEVELOPMENT PROCESS The development of a new product 'follows a systema: :

method. That is to say, it follows a sequence and it grows in stages In each stage, management must be able todecide whether: = move on to the next stage, abandon the product or seek additions information. This procedure is called product evolution.

1.

Generation of Ideas for New Product New products are born from ideas. It follows then that tr::

more ideas a company gathers, the better it~ chances for ::' ; successful new product development: There are several source; from which a new product idea can be derived.

Such source:

include the internal sources open to a company. The internal sources have to do mostly with top managemer ~ company sales force and the company's research and developme-: department. The external sources include customers, ,competito" ~ technology, and adapting foreign products. The latter can be use", in that they reduce the lead time in introducing new products.

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2.

Idea Screening Stage After generating a product idea, it will be necessary

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establish methods of investigating whether it is worth pursuing or 'lot, bearing in mind the high cost of a new product failure. Idea screening is to determine which one warrants further studying. 'Idea, when screened, are either accepted or rejected. Tt'le criteria for idea screening require that: (a)

The product will meet a clearly defined consumer need.

(b)

The product is consistent with the firm's production and marketing policies.

(c)

Tile product will utilize the firm's existing skills and resources.

(d)

The product will contribute to the firm's long-run profitability. As soon as the list is compiled, the next step is to evaluate

each product's potential. However, company management must be careful not to drop good ideas (drop-error) because of the ­ complexity and cost of the idea.

While evaluating idea~

companies must be careful not to permit a poor idea (go-error) to move into development and commercialization. Product failures can be absolute, partial or relative, and all result in the loss of money and material resources. After evaluating the ideas, the next step is that of making decisions based on earlier analysis which will be either to continue work on new productsor discontinue the work. The decision must be objectively reached.

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3.

Concept Development and Testing Ideas that have survived screening are developed ,--­

product concept. It is necessary that product idea, product conce.

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and image be distinguished. A product idea is an idea for a possir

product that a company can see itself offering, expressed ­

meaningful consumer terms. .A product image is the partie; :="

picture that consumers require of an actual potential product. E.

developing a product concept we are talking about the markets- ::

perception of a product which will satisfy a specific consumer wa~'

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and may even differ from the consumers' own perception of wha

is required. Therefore, the marketer in trying to develop the idee s

into a concept, may ask questions such as "who is to. use tl--:­

proouct?" "what primary benefit should be built.into this product?

Concept testing is designe.d to guage or mea sur­ consumers' reactions at an early stage.

It involves testing tr::­

. product concept with an appropriate group of target customers Group discussions are widely used means of concept testing. When the product concept has been developed sufficient.' to specify the product attributes in some details, the next thing

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todetermine which combination of attributes the consumer prefers The trade-off anatysis is one of such methods to use in deterrninir; the combination of attributes the consumers prefer This involves asking the consumers to indicate their preference for attribute leve 5 with two attributes at a time.

4.

Business Analysis According to Kotler (1976), after the development and test: r

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of the product concept, the next step management will take is .:

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It:

evaluate the business attractiveness of the proposal.

Here,

management. (1)

Identifies product features, and' (2)

Estimates market

demand and sales and its costs and profit projections to know if they satisfy company's objectives and consumer needs.

Such

factors as technological trenr! political pressure, social and cultural considerations, legal position, may lead to a decision not to manufacture a product' So, management has to find out if the product features suit all these conditions before it can embark upon production of the product. Management may also wish to know if production equipment available can be used to produce the features needed. 5

Product Development

If the product concept passes the business test, it might be necessary to embark on the physical development of the product. This is the first major investment and must be carefully done. However, many a product idea fails to reach the development stage. The development stage involves technical development, production costs and planning, market evaluation of product prototype, marketing mix plan, etc. It is necessary for the company to develop prototypes, using the research and development or engineering department The prototype must be seen by consumers as embodying the key attributes described in the product concept statement. The prototype must be seen to perform safely under normal use and condition, and must be within projected cost and bUdgetary limit.

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The marketing mix planning involves the developmen: :' themarke.ting strategies. The marketing mix variables include pre-:­ promotion, distribution, in addition to product. The company she; : establish price since it is often critical in the successful operat :,­ of a business organization. Promotion is used to inform a-: persuade the market regarding a company's product. Distribut i :

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is the assembling and dispersal of a standard of living, and it is

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system of exchange activities that gathers the products ar: disseminates them among ultimate purchasers. All these must

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well coordinated. 6.

Test Marketing Since cost of launching a new product is very high, a.. . :

more than half of new products launched fail in the marke: . . marketers are left with rio alternative but to look for ways :" minimizing the risk offailure of a new product introduction. One c the effective ways of doing this is through test marketing. Te3 marketing

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"an assessment of trade and consumer reaction::

the total marketing mix of a brand in a defined limited geographic:: area within a market, over a defined periooof time, under norrr e marketing conditions" (Ayoola, 1994:33). The National Industrial Conference Board (1972:12) define; test marketing as "the development and execution of a miniatL."== of national market planning in order to gain experience which

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provide the basic guidance in refining and executing a natio r- = plan that will have a high probabiliW of success". In essence, t-==, purpose of such a test is to determine the probable sales and pre""';: of the new product when marketed nationally, and the soundness

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of the marketing mix being used. It is important to realize that not only is the acceptability of the new product being tested, but also the marketing plan that will be used to introduce it nationally (Boyd & Nfassy, 1977). Test marketing is used to check on: (a)

consumer and trade reaction to the product,

(b)

the effectiveness of the marketing support,

(c)

the likely commercial viability of the product (Morden, 1991 :283).

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if the intention of test marketing is to obtain a time pattern of demand for the product, it may take a long time for this tc': . established. Duration of test marketing will differ dependin nature of product, risk of competition, cost of test marketing, and of course, opportunity cost of delaying a national launch. There is need to takeaccount of regionai differences in choosing a location. Level of support must reflect affordable level when going national. Test market validity depends heavily on the assumption that trading conditions in the market are normal, and it follows that any departure from such conditions will bias the results. Competitors, learn quickly of test marketing operation and typically react in one of two ways. If the new product closely resembles existing brands, the manufacturers of these brands will step up their promotion in the test market to maintain existing brand loyaity and prevent th~ '1ew entrant from getting a foothold. Alternatively, if the new product represents a radical departure from existing products, competitors can easily monitor its market performance while developing their own substitutes.

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If competitors find out that the test market of the produc: : promising, they enter the national market at the same time \,,-:" the originator of the product. Because of this, companies omit

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test market stage and take up more exhaustive test of the ,-..- : variables.

SELECTING THE TEST MARKETS Ladik, Kent, and Nahl (1960) as quoted by Boyd et ::i (1977: 305-306) have suggested a list of requirements which cc, .• serve as a useful guide in choosing test markets: They are: 1.

The market should not be overtested. (That is, they she _ • .not have a long history of usage as test markets, beca _ s-.

this may make them atypical).

2.

The markets should have a normal history with respec: usage of the product type under investigation.

3.

The markets should represent typical advertising situati: - •

4.

The markets should not depend on any single industry. :

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example, lay-offs in this industry during the test period c: _" confound the results). 5.

Markets with unusual characteristics not normally assocs> with target groups (e.g. state capitals and university c: -:- : should be as free as oossible from strong outside :""-:::, influence.

6.

Each market should coincide, as much as possiblev-: the geographical area covered by the local media'::' :." the market should be as free as possible from strong c .: :,1 :", media influence. 41:8

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The markets should provide the opportunity to select a local media mix similar to the mix to be used on a national basis.

8.

The market should not be too small to provide accurate measures of sales when the results are projected to large metropolitan markets. Nor should they be so large that testing would require very large outlays for promotion and selling.

7.

Marketing Introduction: This is the stage of introducing the product into the market.

It involves the installation of equipment, factory and other operational infrastructure for full-scale production. This will depen'C on the result. ofpthe test marketing. The company may decide. to enter the market one at a time or many markets at the ~ame time The market is often challenged here by competitors at a faster rate, so that if no adequate marketing effort is made, the product may fail.' If the product is first in the market, it may 9ain a greater market share. Activities to be carried out when introducing. a product include: (a) Building up production: This must be to specification and standards already set. All {actors of production must be at w~rl1 here ..

(b)

Preliminary announcement to trade and sales forces: Herea.prelimlnary announcement is made to the market and sales force. Distributors are contracted and adequate information flow is created.

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(c)

New product programmes- are introduced to all sale!:s personnel. All staff of the firm, especially sales personr s are informed of the new product and programme s Promotional, distributive, product characteristics and pricr-; strategies are conveyed.

(d)

The sales people are trained after the company woul: have taken decisions on the channels of distribution t: :~::

adopt. The company may also embark upon training dealers. (e)

The declslon to start new outlets or use existing ones should be solely objective. The outlets to be used

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the product compatibility with existing products and out

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available must be identified. (f)

Public shows and exhibitions. Some preliminary disr

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of the product at company offices, shows, and exhibitlC" : and trade fairs may be necessary at this point. (g)

Distribution of promotional materials and advertising

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prints. (h)

Initial advertising and publicity should be carried out.

PRODUCT LAUNCH The launching of the product must be properly monit:: -,:': and evaluated carefully. Other issues that go along with iaunc- -.

include: (a)

First calls: The company must create good public rela: ~". in this respect.

(b~

Filling of initial order: The initial order must be hanc ::" : such a way as to remove any type of bottle-neck.

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_ _ _ _-11> stock-out. This is important for an early impression.

The task of

commercialization is to get dealers to stock the item and persuade the ultimate consumer to purchase the item for the first time. (c)

Field reports and feedback:

This involves getting a

feedback from the sales force, distributors, agents, etc. FOLLOW-UP AND REVIEW Follow up and review activities would involve: (a)

Ensuring internal communication: As the orders are being filled, adequate communication flow is necessary internally so that the.product can properly be reviewed where necessary.

(b)

Prompt correction of errors: Errors in terms of product defects or wrong delivery should be corrected without delay so that ·th(; company does not lose its customers in the

(c)

process. Measurement and control: Good measure should be undertaken over the sales force, distributors, and even the production department to ensure that the right quantity and quality are produced at all times. COMMERCIALIZATION: After the product has been launched, the company can go

into large-scale production and distribution of the product to larger geographical areas and markets.

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WHY NEW PRODUCTS FAIL In spite of high cost of new product introduction, and care taken throughout the product planning and development process, it is commonly observed that more than 50% of new product introductions fail (Ayoola, 1.994). People often blame new product failure on wrong pricing. This is not necessarily true.

Many

new J>~oducts fail for different reasons amor 19 wh1cn are., (a)

Inadequate market analysis. This incfudes quantitative maasurement of the market, inability to determine buying motives and habits, misjudgment of what marker produc: needs are, and failure to provide a sufficiently new anc unique product.

(b)

Product defects: Lack of durability, poor product tJeslgr or inadequate quality control.

(c)

Poor timing of intrcductions

(d)

Competit.ive activities: This may be in the fprm of pries reduction by competitors which may undercut the marke entry of some new products.

(e)

Insufficient marketing effort: This manifests in failure ':: commit the resources needed for intensive-marketing effc:,-,

(f)

Inadequate sales force: Sales force may be insufficier-' trained or motivated.

(g)

Weaknesses in distribution: Some companies may 5e ,:01::: the wrong trade channels and/or fail to sufficiently pror-'~:Ih:: the new product to the trade (Ayoola, 1994:3;3-)\

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CONCLUSION If companies would avoid the pitfalls listed above, incidenc., of product failure will be considerably minimized among business orqanisations.

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REFERENCES

Alderson, W. (1957),

Marketing Behaviour and Execuiiv: Action, Homewood, III: Richard D. lrwi.. .

Ayoola, P. (1994),

"Launching a New Product in :: Deregulated Economy".

Journal, Vol. 3, No.

Merketin;

19, January ­

March, 29 - 33.

Booz, Allen and Hamilton, Inc. (1981),

NewProdudsManagemer~ J

for the 1980 s, Chicago:

Booz Alle­

and Hamilton.

BoozAllen and HamiHton, Inc. (1982), New Products Managemer: for the 1980's, Chicago: B09z, Alle­ and Hamilton.

Boyd, H. W. Jr., and Massy, W. F. (1972), Marketing

Managemer~

New York: Harcourt Brace Jovanovic­ Inc.

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