NMIMS

NEW PRODUCT DEVELOPMENT

APPLICABLE FOR JUNE 2022

1. Dabur India Ltd is one of the largest FMCG companies in India. It is also World’s largest
Ayurvedic and Natural Hair Care Company. Dabur today operates in key consumer product
categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care and Foods. The
coronavirus pandemic has brought a change in demand dynamics with consumers
increasingly seeking Ayurvedic products that build immunity. You are the Product
Development Manager and have been given a target of introducing at least 30 new
products across their different product categories in the next one year. Identify different
ways you shall consider introducing new products (Hint: Give some examples of the type
of products you would like to consider from the product categories). Also, since the time
period is short what type of “product development” model you shall use and why? (Hint:
Compare some common product development models studied in the class and explain the
benefit of the one that you will choose)

Answer:

New product development

We can define “new product development” as the process of designing, evolving, and
marketing a new product or an idea or amending an existing product.The product can be
new to the marketplace or new to your company, or, an existing product that has been
upgraded. In many cases, a new product will be created and improved when extensive
changes have been made.We can say that product development is a broad field, where the
organisations are engaging all their resources to be successful in the market. We know that
improving and updating the different product ranges availableis essential for the success for
any organisation. But, failure to improve could result in a decline in sales and with
competitors moving ahead. Theprocess of NPD is more important within an organisation.
After undergoing the stages of their lifecycle, the products will ultimately have to be
replaced.

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New products (that an organisation develops and introduces in the existing market) have to
compete with existing products and productlines. Many new products fail to survive against
products that already exist in the market. Thus, while introducing a new product in the
existing market, it is important to make incremental improvements in new products or even
reduce their cost.

Introducing new products in existing market:

Introducing new products in the existing market involves offering new products to the
existing customers. An organisation creates new products and services targeted at its
existing markets to achieve growth. In order to introduce a new product, an organisation
analyses its current market to identify a number of opportunities that can be
exploited.These opportunities relate to existing market requirements. For example, you may
identify that there is a requirement for a new sizedproduct in the market. Now, you can
develop a product, meeting the size requirement of the existing market.

An organisation may follow different strategies for introducing newproducts to the same
audience. For example, it may extend the current product line by producing different
variants or repackaging existing products; or develop related products and services; or focus
on improving customer services and quality. Usually, while introducing anew product in the
existing market, an organisation extends its product range available to its current markets. It
is done by:

Investing in R&D of additional products:

When you need to launch new products in the market, you have various options and the
first one is to invest in research and development activities of additional products. Dabur is
one of the most popular and established FMCG companies in India and when it plans to
launch new products in different categories, it is good to conduct some R& D activities for
the same. It will help the organization to have detailed planning about the launch and later
commercially launch it successfully.

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Acquiring rights to manufacture someone else’s products:
If any organization does not want to develop its own products from scratch, it can also
acquire rights to manufacture the products of others but this is not feasible and adopted by
large and successful organizations as they prefer to research and develop their own
products. Dabur is very much capable of developing its own products so this option is not
for them.

Buying a product from someone else and branding it:

One more option of introducing new product in the market is to buy the product from
someone else and brand it under your name and sell to the customers. Many smaller and
medium size firms use this strategy but Dabur has the capability to work on completed new
product development process and launch the products. People trust the brand name and
Dabur should develop and manufacture new products under its units only.

Developing a product in a joint venture with another company:

One more famous and commonly used option is to enter in a joint venture with another
company and then launch new products. Dabur may assess this option if it’s feasible for the
firm. Dabur may join hands with any organization working in similar industry and develop
the products under joint name.

Types of products to be considered

In health care categories, I would suggest to launch some products such as immunity
boosters, multi-vitamin tablets, flavoured glucose powder etc. Under skin care category, it is
good if Dabur comes up with herbal creams, powder etc. Dabur is still not offering any
crucial hair care products so it may come up with shampoos, conditioners, hair cream and
gel etc.

Models of product development

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  Department-stage model
 Activity stage model and concurrent engineering
 Cross-functional model
 Decision-stage model
 Conversion-process model
 Response model
 Network model

Ideal product development model and its benefits:

There are various types of product development model and in this case, Dabur needs to
launch several products in different categories so cross functional can be used here. While
developing and launching products in different categories, various departments would be
involved so it is better to go with this model. The major problem while developing anew
product is concerned with communication between different departments. The new
product development projects require frequent interaction between departments as
projects move between different functions back and forth. Moreover, there could be
various changes at each stage of product development, which may lengthen the overall
product development process. Here comes the role of cross-functional teams that help in
overcoming such limitations. A cross-functional team involves people from all necessary
departments involved in developing a new product. In otherwords, a cross-functional team
is a dedicated project team involving people from different departments/functions.

2. You and your friend have worked on the idea of a unique two-wheeler that runs on
electricity. This can be mainly used for B2B purpose by all the delivery companies like
Swiggy, Zomato, Tata 100mg and other Online E-commerce platforms. The potential for
the product is huge; however, you need to be very sure of the Product Performance
before you approach the VC for funding for commercial scale manufacturing. To ensure
that the actual product meets the predefined quality standards, you need to do testing at
various stages of NPD. Explain all the different types of testing you will be doing during

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the different stages of NPD of your product. What shall be your final step before you
approach VC to fund the project?

Answer:

Every business has to develop unique strategies, taking into account the external and
internal factors which impact the business. The business has to develop a corporate level
strategy, business level and strategies for thevarious functional as well as operational units
of the business. If the corporation extends beyond the borders of one country, it is also
necessary
To develop global level strategies of the business. Strategy formulation is ascientific process
which involves a sequence of logical steps. These steps have to be understood so as to
develop the strategy, necessary for theneeds of the business. Every business also has certain
core competencies which play a pivotal role in strategy formulation.

Types of testing to be done during new product development:

Concept testing:

Concept development and testing refers to technically developing anidea on the paper. In
concept development and testing step, the organisation takes the decision whether the idea
should be developed into the final product or not. The idea development includes several
concepts, such as usage, segment and primary benefits of a product.Concept testing helps
to predict the profitability of a new product before its launch in the market.Concept testing
involves a systematic procedure to predict the success of the new product idea before it is
marketed. The initial preliminary concept testing may be done by providing customers a
concept statement consisting of written product description of the new product.The
customer is required to provide his evaluation. The description may also be provided in a
visual form. Alternatively; or at a later pointof time, a product prototype may be developed
so that the customercan experience the product and provide his observations. Where
applicable, the prototype may also be in the form of computer simulation providing a virtual
reality experience to the customer.

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There are also several quantitative and qualitative methods available for performing
concept testing. Concept testing may also be performed through field surveys, personal
interviews and focus groups to be followed with further quantitative analysis to provide
insights.Concept testing can also be done by positioning the product alongside the
competitors’ products and then scoring the features.

Market testing:

Before launching any new product commercially, companies should go for test marketing to
avoid any issues which may arise later. Concept testing is concerned with measuring
customer reactions to the idea or concept of a product. In fact, it is a kind of research in
which the product idea is screened before any money, time or labour are committed to
making the prototype products. The idea of a product with as many details as possible is
made known to the customers either verbally or through the use of suitable blue prints.
The response of the customers is checked and only if it is found encouraging, then the
development of product prototype is taken up. Here company will develop new products
which will be purely customer based so their reactions are most important and should be
taken to proceed further. Concept testing can tell whether the product is likely to be a
success or not.

Before commercial launch, you should test your product and check if there any changes or
modifications to be done. If you do not do that, you may find the possible errors later, which
can take your lot of time to correct as you have already launched the product so product
testing is necessary. This test will prove whether the product performs as expected or
whether it lives up to the promise of the concept. Such a test enables the management to
pick out the likes and dislikes of the consumers towards the product. It also gives an
opportunity to the buyers to compare the product with the competitive products.

Even the most favourable results from the two tests mentioned above are not conclusive
evidence for the success of a new product. For instance, even where the product is seen to
possess a high quality, market failure is still a possibility if other important factors in the

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marketing mix show weakness. It is, therefore, logical to examine how the company’s total
marketing mix may be tested by conducting test marketing. Under test marketing, the
product is introduced in selected areas often at different prices in different areas. These
tests would provide the management, an idea of the amount and elasticity of the demand
for the product, the competition it is likely to face, and the expected sales volume and
profits it might yield at different prices.

Venture capital is a private or institutional investment made to early start-up companies.

Venture Capital is money invested in businesses that are small; or exist only as an initial
stage but have huge potential to grow. The people who invest this money are known as
venture capitalists.It is an investment made when a venture capitalist buys shares of a start-
up company and become a financial partner in the business.Venture Capital is also stated as
a huge capital risk or patient risk capital investment, as it involves the risk of losing the
money if the venture doesn’t succeed.It is the basically the money invested by an outside
investor to finance a new, growing or troubled business. The money invested, by capitalists,
is in exchange for an equity stake in the business rather than given as a loan.Before we
proceed to approach venture capitalists, it is very important to finalize the prototype of the
product so that we can show it to VC, accordingly they can assess the product and if they
find it feasible, they may show some interest to invest the money.

3. In the last 3-4 years, with easy and cheap access of internet, there has been significant
rise in various OTT platforms, which got accentuated due to the pandemic in 2020 - 2021.
This has affected the DTH market significantly especially in the Tier 1 cities in India.

a. Considering the concept of Product Life Cycle, where would you put the DTH/Television
sector in their lifecycle? Explain each phase of the lifecycle and justify your answer with
examples.
b. Giving examples, explain how some of the Television network companies are evolving
by new product development and attracting more consumers than ever before.

Answer: a)

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Technology is often thought as the domain of scientific and engineering personnelof an
organization. It plays an important role in the economic growth of the nationand also plays a
significant role in enhancing industrial competitiveness.Technology has emerged as the
most important resource that contributes directly to socio-economic development.
Technology has great impact on the functionalityof an organization. Yet, successful
implementation of technology within thebusiness requires strategic technological decisions
taken by people from different functional areas such as marketing, production and finance.

Product life cycle:

Introduction stage
Research or engineering skill leads to new product development. The product is submitted
to the market at the stage of commercialisation. The concept of product lifecycle starts from
the ‘commercialisation’ stage of new product development. At this stage, product
awareness and acceptanceamong prospective customers are minimal.DTH service was
introduced in India way back in 2003.

Growth stage
The product begins to make rapid sales gains because of the cumulativeeffects of
introductory promotion, distribution, and word-of-mouth influence.There is a sharp rise in
profits at this stage. However, for sustained growth, consumer satisfaction must be ensured
at this stage. This stage begins when demand grows rapidly. Within few years’ time, DTH
services were used by millions of Indians. In last few years, we have seen several
developments in DTH industry and companies are trying hard to attract more and more
people. For example, in last few years many players have entered in this industry and this is
the proof that industry is performing well.

Maturity stage
Sales growth continues, but at a diminishing rate, because of the declining number of
potential customers who remain unaware of the product or whohave taken no action.I
would say, DTH industry has almost reached to the maturity stage.

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Decline stage
Eventually, sales start declining due to multiple reasons. Changes incustomer preferences,
competitive structure in the market, technology andother environmental forces lead to
thedecline of sales.As of now, DTH operators do not worry about this stage but they need to
come up with innovative features and plans to retain old customers and attract new ones.

I have mentioned above all the stages of product life cycle and as per my view, DTH
industryis in maturity stage and in last 5 years, there is rapid increase in the usage of these
operators so this industry is somewhere between growth and maturity stage and it should
continue for next few years.

b)

Every business has to develop unique strategies, taking into account the external and
internal factors which impact the business. The business has to develop a corporate level
strategy, business level and strategies for thevarious functional as well as operational units
of the business. If the corporation extends beyond the borders of one country, it is also
necessary to develop global level strategies of the business. Strategy formulation is a
scientific process which involves a sequence of logical steps. These steps have to be
understood so as to develop the strategy, necessary for theneeds of the business. Every
business also has certain core competencies which play a pivotal role in strategy
formulation.

Growth of television network companies:

With the changing business environment, organizations are trying hard to come up with
new and innovative products to attract new customers and retain old customers. Television
network companies are launching new products and growing well. Many television network
companies such as Zee entertainment etc. have launched variety of new products like shows
and events to attract new customers towards the television channel or brand.

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The report, titled India Pay-TV Distribution 2021, predicts that more than 96% of India’s pay-
TV homes will be digitalized by 2025 with total pay-TV subscribers expanding from 127
million in 2020 to 134 million by 2025.DTH will be the key driver of growth fulfilling the
needs of the majority of new TV households entering into the pay-TV ecosystem. The
recommencing of fresh content and live sports together with improvements in consumer
and economic sentiment will lead to a sharp recovery in 2021. After a 25% contraction in
2020, pay-TV advertising will grow at 12% CAGR over 2020-25.

Major Indian television companies are coming up with new shows of different nature which
are attracting people like Star networks bought the rights of IPL and showing IPL matches.
TV 18 launched some shows on OTT platforms which are doing quite well. Many tv channels
are also launching their shows on OTT platforms like ZEE group programs on Zee 5, Sony
channel programs on Sony LIV. One more example would be Bigg Boss which was especially
launched on VOOT select so it was quite different and innovative idea to attract more
customers.

Finally, it can be said that, gone are the days when people were happy with the basic
content on few television channels, now the scenario has changed and people of young
generation need more variety in the channels, content and shows. It is very important to
work as per the needs and demands of customers else firms will lose the crucial market
share.

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