NEW PRODUCT PLANNING AND DEVELOPMENT

Product planning is a process used to identify and develop new products. The
purpose of planning is to make choices about which product ideas a company
should invest in. Companies can approach product planning from a number of
different perspectives. Having a system in place before planning begins is
important as it helps to avoid wasted time and creates a framework for decision
making.

New products are a vital part of a firm’s competitive growth strategy. Leaders of
successful firms know that it is not enough to develop new products on sporadic basis.
What counts is a climate of a products development that leads to one triumph after
another. It is commonplace for major companies to have 50 percent or more of their
current sales in products introduced within the last 10 years.

Some Additional facts about new products are:

 Many new products are failures. Estimates of new product failures range from
33%-90%, depending on industry.
 New product sales grow far more rapidly than sales of current products,
potentially providing a surprisingly large boost to a company’s growth rate;
 Companies vary widely in the effectiveness of their new products programs;
 A major obstacle to effectively predicting new product demand is limited vision;
 Common elements appear in the management practices that generally distinguish
the relative degree of efficiency and success between companies.

Why many new products fail on the market

 Although an idea may be good, the market size may have been over estimated.
 Perhaps the actual product was not designed as well as it should have been.
 Or maybe it was incorrectly positioned in the market.
 It could have been priced too high.
 Advertised poorly.
 In some firms, a high level executive might push a favourite idea despite Poor
marketing research findings.
 Sometimes the costs of product development are higher than expected.
 Sometimes, competitors fight back harder than expected.
 Non-delivery of promised benefits of product.
 Rapid change in the market after the product was introduced.

Need for research

The keystone activity of any new product planning system is research – nut just
marketing research, but technical research as well. This need will be more clearly
understood if some of the specific questions commonly raised in evaluating product ideas
are examined:
1. What is the anticipated market demand over time? Are the potential applications
for the product restricted?
2. Can the item be patented? Are there any antitrust problems?

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 3. Can the product be sold through present channels and sales force?
4. At different volume levels, what will be the unit of manufacturing costs?
5. What is the most appropriate package to use in terms of color, material, design and
so forth?
6. What is the estimated return on investment?
7. What is the appropriate pricing strategy?

NEW-PRODUCT DEVELOPMENT PROCESS

New Product Development starts with
 Idea generation
 Idea screening
 Concept Development and testing
 Marketing Strategy
 Business Analysis
 Product Development
 Test Marketing, and
 Commercialisation

Idea Generation
Every product starts as an idea. But all new product aides do not equal merit or potential
for economic or commercial success. This is a systematic search for new product idea. A
Company usually generates many ideas in order to find a few good ones. The search for
new-product ideas should be systematic. Major sources of new-product ideas include
internal sources, Customers, Competitors, Distributors, Suppliers, etc.

Idea Screening
This refers to screening new-product ideas in order to spot good ideas and drop poor ones
as soon as possible. To avoid excessive costs in product development, the Company
decides to go ahead only with the product ideas that are most likely to turn into profitable
products. The challenge here is to get a steady stream of good ideas out of the poor ones.

Companies have a new-product committees which make a write-up that describes the
product, target market, and the competition. It makes some rough estimates of market
size, product price, development time and costs, manufacturing costs, and rate of return.
Then the committee evaluates the idea against a set of general criteria. Many companies
have well-developed systems for rating and screening new product ideas. They have a set
of standard questions which include:
 Is the product truly useful to consumers and society?
 Is it good for our particular company?
 Doest mesh/augur well with the company’s objectives and strategies?
 Do we have the people, skills, and resources to make it succeed?
 Does it deliver more value to customers than competing products?
 Is it easy to advertise and distribute?

Concept Development & Testing

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An attractive idea must be developed into a Product Concept. This is a detailed version
of the idea stated in meaningful consumer terms. Ideas are put in a written form or a
conceptual model. The Conceptual model should be tested by asking customers or staff.
Feedback from customers or staff is essential.

Hence, concept testing means testing new-product concepts with a group of target
consumers to find out if the concepts have strong consumer appeal. For some concept
tests, a word or picture description might be sufficient. However, a more concrete and
physical presentation of the concept will increase the reliability of the concept test.
Computers can help in designing concrete concept tests.

After being exposed to the concept, consumers then may be asked to react to it by
answering certain questions. The answers will help the company decide which concept
has the strongest appeal. For example, if the questions asks about the consumers
intention to buy and 10% say they ‘definitely’ would buy and another 5% say ‘probably;’
then the Company could project these figures to the full population in this target group to
estimate Sales volume. However, the estimate may be uncertain because people do not
always carry out their stated intentions. Many companies routinely test new-product
concepts with consumers before attempting to turn them into actual new products.

Marketing Strategy Development

This implies designing an initial marketing strategy for a new product concept.
Marketing strategy consisting of three parts is made. The first part describes the target
market; the planned product positioning; as well as the sales, market share, and profit
goals for the first few years.

The second part of marketing strategy statement outlines the products planned price,
distribution, and marketing budget for the first year. The third part describes the planned
long-run sales, profit goals, and marketing mix strategy.

Business Analysis
This is a review of the sales, the costs, and profit projections for a new product to find out
whether these factors satisfy the company’s objectives. If they do, the product can move
to the product development stage.

To estimate sales, the firm can look at sales history of similar products and conduct
surveys of market opinion. It can the estimate minimum and maximum sales to assess
the range of risks. After preparing sales forecast, management can estimate the expected
costs and profits for the product, including R&D, manufacturing, and finance costs. The
Company can then use the sales and costs figures to analyse the new products financial
attractiveness.

Product Development
If the product concept passes the business test, it moves into Product Development. At
this stage, R&D or engineering develops the product concept into a physical product, to

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ensure that the product idea can be turned into a workable product. This stage calls for
large investment.

The R&D department will develop and test one or more physical versions of the product
concept. A prototype is designed that will satisfy and excite consumers and that can be
produced quickly and at budgeted costs. Developing a prototype can take days, weeks,
months or even years.

The prototype must have the required functional features and also convey the intended
psychological characteristics. The electric car, for example, should strike consumers as
being well built, comfortable and safe. In this case, consumer tests are conducted, in
which consumer test-drive the car and rate its attributes. Depending on the reaction, the
Company will make adjustments.

Test Marketing
If the product passes functional and consumer tests, the next step is test marketing. This is
the stage of new product development in which the product and marketing programme
are tested in more realistic market settings. It gives the marketer experience with
marketing the product before going to the great expense of full introduction. It lets the
company test the product and it entire marketing programme, i.e., positioning strategy,
advertising, distribution, pricing, branding and packaging, and budget levels.

Test marketing involves getting samples and testing them on the market. A group of
consumers in their localities is given goods to test. It should be noted that the amount of
testing needed varies with each new product. Test marketing costs can be enormous, and
it takes time that may allow competitors to gain advantages.

Commercialisation
Test marketing gives management the information needed to make a final decision about
whether to launch the new product. If the company goes ahead with commercialisation,
i.e., introducing the new product into the market, it will face high costs. For example, the
company will have to build or rent a manufacturing facility. It may have to spend on
packaging, advertising, sales promotion and other marketing efforts. It should be noted
that Commercialisation is the beginning of Product Life Cycle (PLC).

Quality level
Consumers consider the level of product quality when making purchase decisions. At
minimum, buyers want products that will perform the functions they are supposed to and
do so reasonably well. Some customers are willing to accept lower quality if product use
is not demanding and the price is lower. In designing new products, marketers must
consider what criteria potential customer use to determine their perceptions of quality.
Eight general criteria are given below:
1. Performance – How well does the product do what it is supposed to do?
2. Features – Does the product have any unique feature that are desirable?
3. Reliability – Is the product likely to function well and not break down over a
reasonable time period?

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 4. Conformance – Does the product conform to established standards for such things
as safety?
5. Durability – How long will the product last before it will be worn out and have to
be replaced?
6. Serviceability – How quickly and easily can any problems be corrected?
7. Aesthetics – How appealing is the product to the appropriate senses of sight, taste,
smell, feel and/or sound?
8. Overall evaluation – Considering everything about the product, including its
physical characteristics, manufacturer, brand image, packaging and price, how
good is this product?

Product design
Many well-designed products are easy to use as intended and pleasing to the senses.
Designing new products with both ease of use and aesthetic appeal can be difficult, but it
can clearly differentiate a new product from competitors. Good design can add great
value to a new product.

Product safety
Clearly, new products must have a reasonable level of safety. Safety is both an ethical and
practical issue. Ethically, customers should not be harmed by using a product as intended.
The practical issue is that when users get harmed by a product, they may stop buying, tell
others about their experience, or sue the company.

PRODUCT LIFE CYCLE (LLC)

Introduction
After launching the product, management would want the product to enjoy a long and
happy life. It should be noted that products are born, prosper and die. Although
management does not expect the product to sell forever, the company wants to earn a
decent profit to cover all the costs and risks that went into launching the product.

PLC is the course of a product’s sales and profits over its lifetime. It involves five distinct
stages namely product development, introduction, growth, maturity and decline.
Therefore, the demand for a product and its acceptance tends to follow this predictable
pattern (PLC) as indicated in figure 1 below: It should be noted that the time spans of the
stages vary considerably across industries.

Figure given below shows a typical product life cycle (PLC) although its exact length and
shape is not known in advance

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Figure 1: PRODUCT LIFE CYCLE

Practical Problems of PLC

 Hard to identify which stage of the PLC the product is in.
 Hard to pinpoint when the product moves to the next stage.
 Hard to identify factors that affect product’s movement through stages.
 Hard to forecast sales level, length of each stage, and shape of PLC.
 Strategy is both a cause and result of the PLC.

The four main stages of a product's life cycle and the accompanying characteristics are:

Stage Characteristics, Objectives and Strategies

1. Introduction 1. costs are very high
stage 2. slow sales volumes to start
3. little or no competition
4. Negative profits
5. Marketing Objectives: Cause Pdt awareness and trial
6. demand has to be created
7. customers have to be prompted to try the product
8. Price: use cost-plus formula

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 9. Build selective distribution

10. Heavy promotions to entice product trial

1. Average cost per customer
2. sales volume increases significantly
3. profitability begins to rise
4. public awareness increases
5. competition begins to increase
2. Growth stage 6. Objective: To maximize market share
7. Product: Offer warranty, hyper service
8. Penetration pricing strategy
9. Build intensive distribution

10. Reduce or stabilize promotion

1. Costs are lowered as a result of production volumes
2. sales volume peaks and market saturation is reached
3. increase in competitors entering the market
4. Prices match the best competitors
5. Profits remain high
6. Objective: Maximise profit while defending market share
7. Brand differentiation and feature diversification is emphasized
3. Maturity stage
to maintain or increase market share
8. Build more intensive distribution
9. Increase promotion to encourage brand switching
10. Modify the market: look for new users, new segments
11. Modify the product: Durability, taste, new features

12. Modify marketing mix

1. costs become counter-optimal
2. sales volume decline
3. prices, profitability diminish/decline
4. Competition declines
5. Objective: Reduce expenditure, milk the brand
6. Product rejuvenation
4. Decline stage
7. Phase out weak items
8. Cut price
9. Selective distribution, phase out unprofitable outlets
10. Reduce promotions

11. Target laggards

PRODUCT BRANDING
This is a procedure used by firms to research, develop and implement the branding or
naming the product. In other words, a brand is a name, term, sign, symbol, or design or a
combination of these intended to identify the goods or services of one seller or group of
sellers and to differeciate them from those of competitors.

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Perhaps the most distinctive skill of professional marketers is their ability to create,
maintain, protect and enhance brands of their products and services. Consumers view
brand as an important part of product, and a branding can add value to a product. For
example, most beer consumers in Uganda perceive bell lager as a high-quality and
expensive product. But the same beer in unmarked bottle would likely be viewed as
lower in quality, even if the taste was identical. Branding has become so important that
today hardly anything goes unbranded. It helps many buyers and the Company in many
ways.

In branding the product, there are some terms used e.g. Brand mark such as sportsman,
i.e. a man on the packet. We also have a Trade mark, i.e. that part of the brand with a
registered legal part. So no competitor can use it. Trade name, i.e. part of the brand
which is full legal name of the organisation that uses the brand, e.g., BMW, Coca-cola,
Kodak, MTN, etc.

Desirable Qualities/Features of a Brand Name:

1. The brand name should suggest something about the product’s benefits, e.g. Doom
suggest death/destructive.
2. It should tell us about product quality, e.g. Tyson Waragi.
3. It should be distinctive, i.e. should not easily be confused with another brand e.g.
Nescafe, Shell, Fido Dido.
4. It should easily be pronounced, recognised, and remembered. Short names help e.g.
Tide, MTN. But longer ones are sometimes effective, e.g. ‘Love my Carpet’ cleaner,
‘Better Business Bureau’.
5. It should be capable of registration and legal protection. A brand name cannot be
registered if it infringes on existing brand names.
6. It should have good meaning, i.e. should not offend other people, e.g. Spanish-
NOVA means does not go.

The brand name should be well positioned in the minds of consumers. Once chosen, the
brand name must be protected and eventually identified with the product category.

Benefits of Branding:
1 Company benefits: These are exclusive to the company e.g.
(a) Reduction of marketing costs through brand awareness. The Company spends less
in advertising and promoting the product.
(b) Branding enables a company to charge a higher price than competitors, thus more
revenue.
(c) A company can use a brand name for competitiveness.
(d) A company can use branding to launch brand extensions e.g. Fanta Orange, Diet Fanta
or Mirinda Orange, Mirinda Fruity, Mirinda Lemon.
(e) A brand offers a company some defence against competition.
(f) It assists a company to differeciate its product.
(g) It helps a company to communicate its offerings.

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2. Consumer Benefits:
(a) Brand helps in shopping because Consumers can easily identify one brand from
another e.g. Pepsi vs. Coca.
(b) It gives customers Psychological satisfaction especially those who want to be
associated with status e.g. Mercedes Benz.
(c) It protects a Consumer by giving assurances on quality depending on the brand you
buy.
(d) Good brands facilitate quick purchases.

Principles of Branding:
 The name should suggest a benefit.
 It should be pronounced in one way.
 It should be pleasing when pronounced.
 It should be distinct and socially acceptable.
 The name should be easy to pronounce, spell and remember e.g. Shell.

Brand Sponsorship:
A Manufacturer has four sponsorship options. The product may be launched as a
manufacturer’s brand, under the manufacturer’s brand name. Or the manufacturer may
sell to distributors who give it a private brand, i.e. a store or distributor brand. This is
when the distributor is so strong to influence the manufacturer to put his name on the
products. In this case, it is a distributor sponsorship. It can also be generic branding, i.e.
the branding indicates category but not manufacturer, e.g. Colgate, Close-up, Geisha,
Blue band, protex, etc. The distributor only promotes the benefits in this case. Finally,
two Companies can join forces and Co-brand a product.

PACKAGING
It refers to the activities of designing and producing the container or wrapper for a
product. It is meant to perform several functions for the product and the consumer as well
as the marketer. It is done at three levels namely Primary, Secondary and Tertiary levels.

Primary level Package: involves the first wrapper, e.g. Cigarette wrapper. Traditionally,
the primary function of the package was to contain and protect the product. In recent
times, however, numerous factors have made packaging an important marketing tool.

Secondary level Packaging: In case of Cigarettes, aluminium casing is meant to protect

cigarettes against moisture; for beer bottles, the Crate is meant to protect against
breakages.

Tertiary level package: (Shipping Packaging). In case of cigarette, we have paper

casing, and for beer, a trailer is a good example.

It should be noted that final Consumers are rarely affected by the tertiary level.

Packaging as a Marketing tool:

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 1. It facilitates self-service, i.e. helps in selecting the product you want. The package
guides consumers in accessing the product.
2. Consumer influence; many consumers want better packages that are attractive and
associated with status. Much of the money we pay is for packaging. In this highly
competitive environment, the package maybe the seller’s last chance to influence
buyers. It may be a ‘five-second commercial’.
3. Packaging promotes the Company and the brand. It does this by contributing to
the image and brand of the Company.
4. Innovative packaging can give a Company an advantage over competitors. Poorly
designed packages, on the other hand, can cause headaches for consumers and lost
sales for the Company.
5. Packaging offers protection to the product.

Factors to consider in developing a total Concept Package:

Developing a god package for a new product requires making many decisions. The
company must establish the packaging concept, which states what the package should be
or do for the product. The package should be consistent with the products’ advertising,
pricing and distribution. Product safety has also become a major packaging concern.

The following considerations are particularly essential:

1. Consumer needs: e.g. product protection. The consumer should be protected and
the package should preserve the product. The consumer needs to use the package
to identify the product and the package should be convenient for the consumers.
The package should promote the product to the consumer e.g. Children are
attracted by primary colours while Ladies like pastel (light) colours.
2. Reseller/Distributor: The package should facilitate the distributor in
transportation, storage and handling. It should also save space, i.e., it should
minimize broken storage. That is why square packs are preferred to round ones. It
should be easy to transfer by wholesaler to retailer.
3. Cost of the package: It should be quantified in costs which should be within
reach of consumers.
4. Environmental Considerations: Packages should be environmentally friendly
and meet the seller’s objectives. Increasingly, Companies are being asked to take
responsibility for the environmental costs of their products and packaging.

PRODUCT LABELING
Labeling is part of packaging because it enables the marketer to display the information
about the product. Labels may range from simple tags attached to products to complex
graphics that are part of the package. Labels perform several functions:
(a) They identify one product from the other.
(b) The might also describe several things about the product e.g. who made it, where
it was made, when it was made, its contents, how it is to be used, and how to use
it safely.
(c) They might promote the product through attractive graphics. However, labels can
mislead customers, fail to describe important ingredients, or fail to include needed
safety warnings. As a result, several national laws regulate labelling, by setting

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mandatory labelling requirents, and encouraging voluntary industry packaging
standards, and allowing government agencies to set packaging regulations in
specific industries, e.g. UNBS.

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