CHAPTER 1

PRELIMINARY

1.1 Background to the problem

Indonesia's economy has recently improved good improvement. Recorded

The Indonesian economy in 2013 was ranked 16th in the world level, in 2014, President
Susilo Bambang Yudhoyono announced that the Indonesian economy was in the 13th
position of the world. Related to the economy that increases competition for businesses
in the country and abroad. A higher competition from economic growth will lead to
businesses that can take advantage of opportunities and challenges that come from
abroad.
Opportunities will arise that cause demand for consumers to grow along with economic
growth. Consumers will be prosperous and expect products that can meet their needs.
Product strategy and development is the right answer for the company to meet customer
demand and needs. The right strategy combined with product development will create
value for the company in the eyes of consumers. In addition, using the right strategy and
product development, indirect companies will be able to compete with similar or not
similar companies.

Continuous innovation and new product development can be brought by the company
into a single protection determining the price of a product. This is because, by innovating
and developing products, new products, new product variants and high quality products
will emerge. On the other hand, the product will have multifunctional or multiple benefits.
Increase other companies

1.2 Identification of Problems

Exposure from the background above illustrates that companies that have
competitiveness must be able to implement strategies and product development to answer
the needs and desires of consumers. Given the importance of strategy and product
development, the problems discussed in this paper include the following:

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a. What is meant by the development of the new product?

b. Why need to develop a new product?

c. What are the typologies of the new product?

d. How do you develop new products?

e. What is the New Product Product and Marketing Development Strategy?

f. What are the factors that drive the success of new products

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 CHAPTER II
DISCUSSION

2.1. Understanding New Product Development

The development of new products is a process of seeking ideas for new goods and
services, and approval of becoming a product that is managed commercially. The basic
reason for companies developing new products is to buy items that have lost interest from
consumers. Experience new items to help increase revenue and profits for the company.

2.2 New Product Concept

New product development cannot be released from special fees, and is canceled. The
majority of product development programs fail to reach the target market of new products
that can really reach the market, about 35% of which start failing. Therefore, the company
requires careful and reliable processes and analysis in order to develop new products.
Overcoming the development of new products, there is a concept development of new
products being peeled off first. The concept of new products can be explored from two
perspectives, namely:

1. New to the market (new to the market) which implies that no company has
produced or marketed a product before.

2. Only for the approved company (only to be suspended) which means other
companies have already paid for the product but the company has not yet
marketed it.

Broadly speaking, the activity of developing new products can produce 6 types of new
products:

A new product for the world, namely products that create a completely new market and
create a new product life cycle. An estimated 10% of total new introductions.

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 1. A new product line (i.e. a new product line), which is a new product for the
company, but launched for an existing market.

2. Expansion of lines (extension lines), namely new products permitted by

companies offered with different benefits.

3. Improvement of existing products (improvements to existing products), namely

products specifically designed to purchase existing product offerings.

4. Re-positioning, namely technical development that allows a product to offer new

applications and serve new needs.

5. Cost redaction, which is the version of an existing product that can provide
equivalent performance at a lower price level.

2.3 New Product Innovation and Development

New products are at the center of the attention of the entire company, because the
contribution is clear for the survival and prosperity of the company. Planning new
products is an important and demanding strategic activity. New products, tailored to
consumer needs, help strengthen the position of the organization in existing markets and
move to new product market.

Important companies develop new products because to maintain the company's growth
and excellence and replace old products. Why is there a need for product development,
this is one strategy to extend the product life cycle (life cycle product) so that the product
does not experience the stage of decline. The development of this product is needed if the
product has entered the maturity stage, that is, where the company's products experience
a saturation point, marked by no additional consumers so that the sales figures remain at
a certain point. If the product has reached this stage, and the company does not

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immediately implement a strategy to attract the attention of consumers and traders. This
will result in lower profits and sales that tend to fall.

Most business people certainly try to create new products that have never been before.
This strategy is indeed quite effective, so that the products created have strong
competitiveness and are able to survive amid the intense market competition. In addition
to creating new products, they can also develop existing products into extraordinary
products. In this case it can improve its quality, renew its shape, or beautify the packaging
of its products. There are several things that can be done in creating new products,
including:
a. Unique and interesting products
Most business people are certainly trying to create new products that have never
existed before. This strategy is indeed quite effective, so that the products created have
competitiveness that is quite strong and able to survive in the midst of intense market
competition. In addition to creating new products, they can also develop existing products
into extraordinary products. In this case it can improve its quality, renew its shape, or
beautify the packaging of its products.

b. Utilizing modern technology in product innovation

Innovation strategy can also be implemented by utilizing modern technological
assistance in every production process and business operation. So that it can be more
productive, have a higher product competitiveness, and can be more researched to reduce
the risk of work errors caused by human error.

c. Improve the quality of human resources

A create innovative products, of course, it requires a human resource that is
competent and has high creativity. Because before planning something innovative, it is
important to increase the knowledge and capabilities of employees in accordance with
the development of the company. Because, without creative hands, it is impossible for an
innovative product to be created.

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d. Improve service
Besides the innovation strategy by creating a product, it can also offer special
services for consumers. For example, serving online orders, providing delivery order
services, and offering a one stop service package to provide total solutions for consumers.
Creativity and innovation are often used interchangeably, but there are basic differences.
Actually creativity is an important part of innovation. Creativity is not enough just to
come up with ideas. Creativity is a prerequisite for innovation and organizational
transformation, because without creativity, innovation is meaningless, and the
transformation will be more or less the same as before. Without innovation, creative ideas
will never be applied.
Creativity creates solutions to problems and innovation involves implementation.
The definition of product and service innovation is innovation used in the overall
operation of the company where a new product is created and marketed, including
innovation in all functional processes or uses. So, innovation is not a concept of a new
idea or new invention but innovation is a combination of all these processes.
The company aims to innovate products to maintain the survival of the company
because of products that have been adenent to changes in the needs and tastes of
consumers, technology, shorter product life cycles, and increased domestic and foreign
competition.
At this time amidst the tight competition, goods offered to consumers must vary with all
their strengths and sophistication. Product innovation must be done through market
research so that the products produced can be in accordance with the tastes and needs of
consumers.

2.4 Typology of New Products

Learning about developing new products is certainly very broad. Companies

generally strive to continually create new products. But it does not rule out that there are
companies that do not develop new products very long. From this criteria, we can group
companies in the typology of new product development.

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a. Prospectors
Is a type of company that uses strategies that are concerned with innovation, and
creativity to create new products or new markets. The company strives to always be a
pioneer in competing, and is willing to sacrifice internal efficiency to innovate, and create.
This strategy needs support from truly expert staff, and has the ability, so that the practice
of human resources emphasizes the search for human resources that are able to create
change, and have high creativity. If internal resources do not meet, the organization will
be willing to seek external resources even at high costs.
b. Defenders
It is an organization that emphasizes the use of stability strategies, and business
survival. This company has maintained its core business or core business, without much
change. The attention of the organization's leadership on long-term stability.
c. Analyzer
It is a company that uses strategies among defenders, and prospectors. This means
that the company is not too brave enough to take great risks in innovating, but still strives
to create excellence in its service to the market.
d. Reactor
It is a type of company that is more pressured by the environment, because it does
not pay attention to the existence of environmental changes and competition systems.
Companies of this type are more concerned with efficiency, reducing costs including
suppressing human resources.

2.5. New Product Development Process

Creating new products requires ideas and various creativity that cannot be
considered playing. It takes various stages until finally an organization or company is
able to create development for new products that can be accepted by the community. The
development of the new product itself is an innovation result whose success will be
largely determined by the quality of the product being developed. Through several
important processes for developing new products, it is certainly very good to be a
reference in creating a superior product innovation.

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Many companies face a problem, where they have to create new products, but the chances
of succeeding in the product are very small. Overall, to create a successful new product.
The company must understand its customers, markets, competitors, and develop products
that provide superior value to customers. Companies must have a strong new product plan
and prepare a systematic new product development process

New product development begins with the creation of ideas. The company finds
and develops new product ideas from various sources. Many new product ideas come
from internal sources. Companies conduct official research and development, choose
ideas from their employees, and exchange ideas at executive meetings. Other ideas come
from external sources. By holding surveys and focus groups as well as analyzing customer
questions and complaints, companies can produce new product ideas that will meet the
specific needs of consumers.
Innovation as a customer-based strategy process

New Product Classification

1. Newness to market
2. Newness to company

New Product Types

1. Transformational innovation
2. New product category
3. Product line extensions
4. Incremental improvement

Finding Customer Value Opportunities

Objective is to identify needs for:
1. New products
2. Improvements to existing products
3. Improvements in production processes
4. Improvements in supporting services

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Developing an Innovation Culture:

1. Innovation Workshop for top executives to develop an innovation plan.

2. Innovation Statement highlights the objectives and senior management roles and
responsibilities.
3. Training programs for employees and managers.
4. Communicate the priority of innovation.
5. Speaking to expose employees to innovation authorities.

The Innovation Strategy Spells Out Management's Priorities for New Product
Opportunities
1. Set specific New Product Objectives.
2. Communicate the role of New Products throughout the organization.
3. Define the areas of strategic focus:
1. Product Scope
2. Markets
3. Technologies
4. Include longer term discontinuous projects in the portfolio along with incremental
projects.

NEW PRODUCT PLANNING PROCESS

1. Customer needs analysis
2. Idea generation
3. Screening and Evaluation
4. Business analysis
5. Product development
6. Marketing strategy development
7. Testing
8. Commercialization

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 Customer Needs
Analysis

Screening
Idea and Business
Generation Evaluation Analysis

Marketing Strategy Product

Development Development

Testing

Commercialization

Responsibility for New Product Planning

1. Coordination of new product activities by a high-level general manager
2. Inter-functional coordination between new product planning representatives
3. Creation of a project task force responsible for new product planning
4. Design of new products manager to coordinate planning between departments
5. Formation of matrix structure for integration of new product planning with
business functions
6. Creation of a permanent design center

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Idea generation
 Idea search: targeted or open-ended?
 How extensive and aggressive?
 What specific sources are best for generating regular flow of new product ideas?
 How can new ideas be obtained from customers?
 Where will responsibility for new product ideas search be placed?
 What are potential threats from alternative (or disruptive) technologies?

BRING UP NEW PRODUCT IDEAS

The new development began with research on various new product ideas. The
emergence of new ideas must be in accordance with the type of business the company
and consumers have as one of the most logical sources for finding new product ideas.

SCREENING, EVALUATING, AND BUSINESS ANALYSIS

1. Idea generation
2. Screening
3. Concept evaluation
4. Business analysis

Business analysis
If management has determined the product concept and marketing strategy, the
company can evaluate the attractiveness of the proposed business. Management must
assess sales, costs, and estimated earnings to determine whether they have met company
objectives. If it is fulfilled, the product can move towards the product development step.
Business analysis
1. Revenue Forecasts
2. Preliminary Marketing Plan
3. Cost Estimation
4. Profit Projections
5. Other Considerations

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Product and Process Development
New product development includes:
1. Product design
2. Packaging design
3. Decision to make or buy product components

Product Development Process:

1. Product Specifications
2. Industrial Design
3. Prototype
4. Use Tests

PRODUCT AND PROCESS DEVELOPMENT

The marketing strategy statement consists of three parts to introduce products to

the market. The first part describes the size, structure, and behavior of the target market,
planned product placement, sales, market share, and profit goals to be sought in the first
few years. The second part of the marketing strategy statement describes the planned
product price, distribution strategy, and marketing costs during the first year. The third
part describes planned long-term sales, as well as the benefits and marketing mix
strategies so far.

If the product concept passes the business analysis test, the concept then goes to
research and development and or engineering to be developed into a physical product.
The research and development department makes one or several versions of the physical
form of the product concept in order to find a prototype that meets the product concept
and can be produced with budgeted production costs.
1. New product strategy
2. Product development and use testing
3. Marketing strategy development
4. Market testing
5. Launch

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Development of the new product includes:
1. Product design
2. Packaging design
3. Decisions to make or purchase product components

Product Development Process:

1. Product Specifications
2. Industrial Design
3. Prototype
4. Use Tests
5. Process Development

MARKETING STRATEGY AND MARKET TESTING

Market testing is a situation where products and marketing programs are
introduced to more authentic consumers to find out how consumers and suppliers manage,
use, and repurchase the product and how much market it has.

Marketing Strategy Decisions

1. Market Targeting
2. Positioning Strategy

Market Testing Options

1. Simulated Test Marketing
2. Scanner - Based Test Marketing
3. Conventional Test Marketing
4. Testing Industrial Products
5. Selecting Test Sites
6. Length of the Test
7. External Influences

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COMMERCIALIZATION
The commercialization phase involves planning and implementing a launch
strategy (Launching strategy) new products to the market. In throwing a product, the
company must decide: when, where, to whom and how

The Marketing Plan

1. Complete marketing strategy
2. Responsibilities for execution
3. Cross - functional approach

Monitoring and Control

1. Real - time tracking
2. Role of the Internet
3. Include product performance metrics with performance targets

VARIATIONS IN THE PLANNING OF NEW GENERIC PRODUCTS

1. Technology Push Processes
2. Platform Products
3. Process - Intensive Products
4. Customized Products

2.6. Inhibiting Factors for New Product Development

The development of new products does not only result in luck. But the
development of new products has a risk of failure. In Indonesia, several new products
failed in the market, such as high-quality beverage products, Frezzy Malta from Multi
Bintang, Sampoerna Executive cigarettes and Super-20 from Sampoerna. New products
continue to fail at a worrying level. The failure rate for new products for nominated
product packages expansion of the product line is estimated at 80% according to Clancy
And Robert S. Shulman in his book entitled The Marketing Revolution: A Raaadical
Manifesto for Dominating The Markeplace.

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This estimate depends, of course, on how researchers define the failure of new products,
for example, if the product fails to provide profits if it produces lower profits than
expected. The failure of this new product can be concluded because it is influenced by
many factors. The following factors inhibit the development of new products:

1. Lack of important new product ideas in certain fields there may be only a few
ways that can improve some basic products such as steel, laundry soap, etc.

2. A divided market: sharp competition causes market division. Companies must

direct their new products to smaller market segments, and this means lower sales
and profits for each product.

3. Social and government constraints: new products must meet community criteria
such as consumer safety and environmental balance. Government regulations
have slowed innovation in the drug industry and have complicated the design of
products and advertising decisions in industries such as the peralata, chemical,
automobile and toy industries.

4. The high cost of developing a new product: a company usually has to produce lots
of new product ideas in order to get some good ones.

5. Lack of capital: some companies that have good ideas cannot obtain sufficient
capital to conduct research.

6. Faster development time: competitors may get the same idea at the same time, and
the winnings will be achieved the fastest. Vigilant companies must accelerate their
development time using design and manufacturing techniques that computer-
aided, strategic partners, preliminary conceptual testing, and advanced marketing
planning.

7. A shorter product life cycle: if a new product is successful, competitors quickly

emulate it so that the life cycle of the new product is shorter

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2.7 Drivers of the Success of New Products
Many things can be a driving force for the need for a new product development. This
driver comes from within the company organization or from the company's external
environment. The company factors are:

1. Financial goals.
The pressure to achieve financial goals such as profit, market share, revenue,
investment needs and others are the drivers of new product development.
2. Sales & Market Share Growth.
Sales growth is an important goal for some companies. Likewise, the power possessed
in the market through existing market authorities is also a driving force for treating sales
growth. New products are one way to achieve and maintain them.
3. Competitive action.
Motivation to compete is one of the drivers for companies to think of new products so
that they have strengths and differences in the market.
4. Life cycle.
Every product offered now by the company has limitations in its marketing time. They
have a time limit before the product has decreased in sales due to consumer switching to
other products. To keep this in line, new product development is needed.
5. Technology.
The development of technology allows people to offer something better than the
current offer, so that it will give birth to new products for companies and competitors.
6. Regulation.
Regulations issued by the government will provide certain restrictions on existing
products so that a new product is needed so that they are not subject to these rules. engine
needs that are not airborne is one of the regulations that encourages the emergence of new
products.
7. Cost and availability material.
Increased costs for certain raw materials encourage companies to look for other
alternatives that will encourage the birth of new products. Likewise the case with limited
raw materials also encourages companies to look for substitute raw materials.

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 8. Invention.
The findings obtained from the results of research and development also encouraged
the birth of new products, such as the discovery of direct-made cameras.

2.8 New Product Launch Strategy

In developing new products. The initial stage that must be considered is the product
planning stage. Mature product planning will increase success in developing new
products. A plan must make product characteristics that will be produced with
assumptions:
1. The product includes pioneer products what are follower products.
2. Choosing truly new products or brand extensions.
3. The product includes the category of consumer goods or business goods.
4. The product is for the community including basic, secondary or tertiary needs.
5. The product is used for all people or limited circles.
6. The product is used for all ages or only certain ages.

Once we know the assumptions of developing new products, we will easily determine
the strategy of launching new products. Where the launch of new products is a fun activity
for marketing professionals. The main reason for this is that this work has interesting
challenges. Besides that, in the launch of new products various marketing sciences and
strategies can be applied. Precisely because it is loaded with marketing functions, the
marketing agents must be careful but firm in planning, implementing, and following up
after marketing new products.

Strict business competition has challenged business people to be always innovative

and creative. One solution is to launch new products every year. The amount launched
depends on the market absorption and the level of competition that exists. Such a strategy
must be supported by all constituents in the company, from research, production,
marketing, distribution, to public relations.

The amount of enthusiasm in launching new products does not guarantee the success
of these products on the market. However, the problem was precisely after the launch of

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the activity. Research data prove that 90% of new products fail within two years. Though
the number of new products or services always increases every year. This also makes it
difficult for new products to get consumers' attention.

The amount of difficulty facing the launch of new products should not reduce the
enthusiasm in disbursing new products. However, a new product is a new blood that is
always needed by the company. Meanwhile, marketing professionals must be aware that
behind the tough challenges of launching a new product there is great potential to succeed.
In carrying out the launch of the new product must pay attention to the following matters:

1. Don't plan to launch before there is certainty that the product is ready to be
launched.
In this context there must be synchronization between the production and marketing
divisions. The production department must ensure that the products produced are in
accordance with the product standards both regarding the quality and standard of product
safety. With the tight competition the marketing department must understand in depth the
marketing strategy that will be applied so that consumers buy the new product. So the
planning of the launch event must be mature.

2. Make the launch plan not rigid.

In the current era of globalization, information and innovation always change every
time. Flexible plans can change at any time, adjust market conditions and information.
Timely product launches will make it easier for the product to be accepted by consumers.
For example the launch of fertilizers for rice plants will be more acceptable when done
during the season when compared to the harvest season, because consumers can
immediately apply it while trying the product.

3. Use several types of media for promotion.

The use of media for promotion is absolutely necessary, but if all that is used is
always the same as the previous one, there will be saturation. Therefore it is necessary
to use new media that has not been widely used. Many media can be used for
promotions, including advertisements (electronic and print), Sales Promotion, online

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promotions through the internet and promotions via Mobile via SMS. The last two
promotional media, currently widely used and are one of the new promotional media.

4. Use a marketing strategy that is sure to develop many marketing strategies in the
world, choosing the right strategy will increase success in developing new
products

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