Product Management 2

New Product Management
BY: MUKESH MISHRA

New-product Options
1)Make or Buy
 a company can add new product through
acquisition or development.
 The acquisition rout can take three forms. The
company can buy other companies or it can
buy licsence or francise from other company
 E.g. coca-cola Thums Up Fritolay –Uncle
Chips
New-product Options
2 Types of New-to-the-world
New Product
New product lines
Additions
Improvements
Repositionings
Cost reductions
Moser Baer has moved from
making optical storage media
to selling home entertainment
20-4
Challenges in new product
Development
1.New- product Success
 Most established company focus on
incremental innovation. It allow companies to
enter new markets by tweaking products for
new customers, use variations on core product
to stay one step ahead of the market
2.New- Product Failure
 New product development can be quite risky.
New product continue to fail at disturbing rate.
Challenges in new product
Development
New product can fail for many reasons
 ignored or misinterpreted market research
 Over estimate of market size
 High development cost
 Poor design
 Incorrect positioning
 Inefficient advertising
 Inefficient distribution support
 Competitors who fight back hard
The New Product Development Decision
Process
Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 20-7

New Product development
1.Idea Generation
 Marketing experts believe that greatest opportunities
and highest leverage with new product are found by
uncovering the best possible set of unmet customer
needs or technological innovation
 Encouraged by open innovation movement, many
firms are increasingly going outside the company to
tap external resources.e.g. P&G connect-and-
development approach to innovation.
2.Idea screening
 In screening idea company must avoid two types
of errors
 A DROP-error occurs when the company
dismisses a good idea, it is extremely easy to find
fault with other peoples ideas.
 A Go-error occurs when the company permits a
poor idea to move into development and
commercialization
 The executive committee then reviews each idea
against a set of criteria
 Does the product meet a need?
 Would it offer superior value?
 Can it be distinctively advertised?
 Does the company have the necessary know how
and capital?
 Will the new product deliver the expected sales
volume, sales growth and profit?
3. Concept development and testing
 Suppose a large food processing company gets the idea
of producing a powder to add to milk to increase its
nutritional value and taste
 A product idea can be developed into several concepts.
 concept 1- An instant breakfast drink for adults who
want a quick nutritious breakfast without preparation.
 Concept 2-a tasty snack for children to drink as a midday
refreshment
 Concept 3- a health supplement for older adults to drink
in the late evening before they go to bed.
 Each concept represents a category concepts that
defines the product competition. An instant
breakfast drink would compete against hot milk,
cornflakes with cold milk, and other home made
items.
 A tasty snack drink would compete against soft
drinks, fruit juices, sports drinks, and other thirst
quenchers.
3. Concept Testing
 It means presenting the product concept,
symbolically or physically, to target consumers and
getting their reactions.
 The more the tested concepts resembles the final
product or experience, the more dependable concept
testing is.
 Concept testing of prototypes can help to avoid
costly mistakes, but it may be especially challenging
with radically different, new- to-the- world products
 Concept testing presents consumer with an
elaborated version of concept
` Our product is powdered mixture added to milk
to make an instant breakfast that gives the person
all the days needed nutrition along with good
taste and high convenience. The product comes
in three flavors( chocolate, vanilla, and
strawberry) and would come in individual packs,
ten to a box, at Rs 110 a box.`
After receiving this information, researchers measure product
dimensions by having consumers respond to following type of
questions:
1. Communicability and believability- Are the benefits clear to you
and believable? If the score are low, the concept must be
refined or revised.
2.Need level- Do u see this product solving a problem or filling a
need for you?
3Gap level-Do the products currently meet this need and satisfy u?
the greater the gap, the higher the expected consumer interest.
Marketers can multiply the need level by the gap level to
produce a need –gap score. high score means the consumer
sees the product as filling a strong need not satisfied by
available alternatives
4.Perceived Value-Is the price reasonable in
relationship to the value? The higher the
perceived value, the higher is expected consumer
interest.
5.Purchase Intention-Would you(definitely,
probably, probably not, definitely not)buy the
products? Consumers who answered the first
three question positively should answer
`definitely` here.
6.User targets, purchase occasions, purchasing
frequency-
who would use this product, when, and
how often?
 Respondents answers indicate whether the
concepts has a broad and strong consumer
appeal, what product it compete against, and
which consumer are the best targets
4.Marketing Strategy Development
 Following a successful concept test, a new
product manager will develop a preliminary three
part strategy plan for introducing the new
product into the market
 The first part describe the target market size,
structure, and behavior: the planed product
positioning; and sales , market share, and profit
goals sought in first few years
5.Business Analysis
 After management develops the product concept and
marketing strategy, it can evaluate the proposal business
attractiveness.
 Management need to prepare sales, cost and profit
projection to determine whether they satisfy company
objectives. If they do, the concept can move to the
development stage.
 Total estimated sales are sum of estimated first time
sales, replacement sales, and repeat sales. Sales
estimation methods depend on whether the product is
purchased once, infrequently or often
6.Product Development
 The job of translating target customer
requirement into a working prototype is helped
by a set of method known as Quality function
deployment(QFD).
 The methodology takes the list of desired
customer attributes(CAs) generated by market
research and turns them into a list of engineering
attributes(E As) that engineers can use.
 The R&D department will develop one or more
physical versions of the product concept. it goals is
to find a prototype that embodies the key attributes
described in the product-concept statement, that
performs safely under normal use and conditions,
and that the firm can produce within budgeted
manufacturing cost.
 When prototype are ready, they must be put through
rigorous functional tests and customer tests befor
they enter the market place.
 Alpha testing is testing the product within the firm to
see how it performs in different applications.
 After refining the prototype further, the company
move to beta testing with customers
 Consumer testing can take several forms, from
bringing customers into a laboratory to giving
them samples to use in their homes.
 P&G has on site labs such as diaper testing
centre where dozens of mothers bring their
babies to be studied
7.Market Testing
 After management is satisfied with functional
and psychological performance, the product is
ready to be dressed up with a brand name and
packaging and put into market test.
 In a authentic setting marketers can learn how
large the market is and how consumers and
dealers react handling, using , and repurchasing
the product.
Method of consumer goods market testing
a) Simulated Test marketing
 It calls for finding 30 qualified shoppers and questioning them
about brand familiarity and preferences in a specific product
category
 These consumers attend a brief screening of both well -known
and new TV aids. once ad advertises the new product but is not
singled out for attention.
 Consumer receive a small amount of money an are invited into
a store where they may buy any item. the company notes how
many consumers buy the new brand and competing brands.
This provides a measure of ads relative effectiveness against
competition ads in stimulating trial.
b) Controlled Test Marketing
 In this a research firm manages panel of stores that
will carry new products for a fee. The company with
the new product specifies the number of stores and
geographic locations it want to test.
 The research firm delivers the product to the
participating stores and control shelf position;
number of facings, displays, and POP and pricing.
 Electronic scanners measure sales at checkout.the
company can also evaluate the impact of local
advertising and promotions
c) Test Markets
 The ultimate way to test consumer product is to put it
into full blown test markets. The company choose a few
representative cities, and the sales f forece tries to sell the
trade on carrying the product and giving it good self
exposure.
 The company puts on a full advertising and promotion
campaign similar to the one it would use in national
marketing
 Test marketing also measures the impact of alternative
marketing plans by varying the marketing program in
different cities.
8) Commercialization
 In this process company will face its largest cost
to date.it will need to conract for manufacture or
build or rent a full scale manufacturing facility.
a) When(Timing)
1.First Entry
2.Parallel Entry
3.Late Entry
b) Where(Geographic Strategy)
 The company must decide whether to launch the new
product in a single locality, a region, several regions,
the national market, or the international market. Most
will develop a planned market rollout overtime
company size is also an important factor.
c) Whom(Target market Prospects)
 Within the rollout markets, the company must target
initial distribution and promotion to best prospect
groups
Stages of New Product
Management
1. The Business Objective
2. The Market Opportunity
3. Refinement of the Product Concept into a
New Product and Business.
4. The Product and Business Plan
5. Justifying a Program: The Accounting
Viewpoint
Stages of New Product
Management
6.The Starting Out
7. Executing The Plan
8. Manufacturing Development
9. The Prelaunch Checklist: Setting Up The
Organization
10. The Launch
The Business Objective
 It is looking at the company, the market place, and
the competition to determine how the new product
opportunity will fit into the overall strategy.
THE FIT
1. Selecting the new product opportunity
a) Desired result -The challenge is to select and
focus on the one that will yield the desired result
g
 Desired result may be revenue generation,
long term growth for the company, strategic
positioning , and operational requirement.
b) Evaluating the Opportunity-All the
opportunities are not truly opportunities for
a company.Altough some of them represent
good prospects from a pure market
perspective, they may not fit with the
company.
2.Understanding the Companies Fitability to the
product, Channel, Manufacturing, and
Technology
 A new product opportunity must easily fit into
the operational culture and temperament of the
firm.
 The new product idea must be tested not only
in the marketplace, but also within the firm to
determine its fitability with the sales
organization, marketing organization, the
current and anticipated capabilities in
development engineering.
3. How does this opportunity fit into goals
and agendas of the company?
 Corporate Brand Identity
 Target growth rates
 Ownership issues
THE STRATEGY
1. What is the company`s strategy in pursuing
this Market– One time hit or Steady
pursuit?
 Overall product Strategy
 Structure of Company
2. What makes the development team think
this opportunity will take off?
 Development team must make the case for
the development program.
 Why will it be successful?
 What is unique about the product or
technology that will be desired and
accepted by the marketplace at this
particular juncture in time and space?
3. Where is the marketing hook?
 Very few product s are accepted that are ‘me
to’in nature, so there must be a clear marketing
advantage at introduction.
 The marketing advantage is generally, but not
limited to, the integration of features within the
product that differentiates it in market place.
 Longer, lower, wider, less expensive, more
functional, and easier to use are all product
design tactics designed to make a product more
marketable.
4. Contingency Planning
 Each new product have a vision of how it will
play out in the marketplace.
 The scenarios of success and for failure must
be thought through, and recovery procedure for
each work out.
 E.g. if a new product is introduced and has
existing competition you are invader, and the
competitor will attempt to defend its territory.
 If the market is worthwhile, the competitors
will enter the race with an offering of its own.
5. The benefits of Strategic Planning
The Strategic Planning Gap
Assessing Growth
Opportunities
1. Intensive growth
Current New product
Product
Current 1.Market 3. Product

Market Penetration development
New 2.Market Diversification
Market development
New Product Planning
Existing New Category

Category
Existing brand 1.Line 2. Brand

Name Extension Extension
New 3.Multiple 4. New Offering
Brand Branding
6. The framework of planning
A. Where we are
1. Initiate a search of records to create a 5 years
history of the company`s performance.
Analyze and draw initial conclusions from the
obtained data. Review trends in sales
engineering, manufacturing expenses, in
addition to product related performance.
2. Create as detailed as possible a product line
analysis to describe the performance of
individuals products.
Examine the costs, features, benefits, trends
and driving force for each product.
It is important to include the sales, general and
administrative expenses since cost may not be
allocated on the activity- based cost basis.
B. Where are we going?
1. Mission Statement
2. Narrative of the dream
3. Narrative of how the plan and reality will fit
together
4. 5 year product line catalogue
5. Product scope definition
6. Specific market segments
7. Industry trend
C. How will we get there?
1. Segment strategy
2. Implementation
3. Investment/ Return
4. Requirement
5. Recommendation
6. Action plan
The Market Opportunity
Category Attractiveness Analysis
Category size
Market growth rate
Product life cycle
Sales cyclity
seasonality
profit
Product as a Business
1.How does it use and generate cash, profit,

and value
2. Product as a servant of business not
conversely
Competitive Game
1 . Upsetting the playing field to your

advantage
2. Faster, more informed solving of customer
problem
3. The playing field is in application of
specific need
Idea evaluation within the
framework of business
1. Setting up criteria
2. Testing each idea
3. Consistency
4. Measuring of ongoing effectiveness
Playing the Game well
1. Identifying those opportunities in which
small incremental changes mean a big
advantage
2. Determine latent opportunity for
competitive advantage and incorporate it
within the product
NPD as a competitive weapon
1. NPD as a survival means in the market

2. Leapfrogging the account and industry
3. Attacking your entrenched position
4. Raising the barrier to entry
5. Raising the expectations of the customer
The Product evolution flow chart
1. Identifying the opportunities that contribute

to the vision
2. Mix of product or service offering
3. Contribution to revenue and profit
4. Product mix analysis, new versus existing
5. Internal requirement, external requirement
6. Projection of competition
7. Optimize and maximize benefit for money
spent
Refinement of the Product
Concept in a New Product and
Business
Refinement of the Product Concept in a
New Product and Business
 It is the consideration to the details throughout
the project, and the new product program, to
generate the desired result.
 Throughout the process of new product
development, the new product developer
breaks ground on several fronts: pricing, costs,
functionality, features, route to the market, and
manufacturing value.
 It is the new product manager`s job to keep
pressure on all of these fronts and manage
them to an optimal amount.
The Idea
1. Generating the Idea
A. Customer needs and wants
I. Direct consumer survey
II. Focused group discussions
III. Suggestion systems and communication from
customers
IV. Customer complaints
The Idea
B. Scientific research
 This method occurs generally as a result of
scientific breakthrough of totally new
technology, or more often from applied
research in the improvement of product.
C. Competitors
 Watch what the competitors are doing in the
way of NPD.They are yardstick measurement
of marketplace activity as an indication of
how your company measures up to the
marketplace.
The Idea
D.Company dealers and representatives
 These sales channels can feedback
customer ideas and also generate ideas of
their own. However, this medium must be
evaluated in light of any individual agenda
that may exist.
E. Top Management
 Top management has the largest bat to
drive a new product development
throughout the otganization.
The Idea
F. Miscellaneous Sources
 Some of these sources are inventors, patent
counsel, university laboratories, govt.
licensing offices, industrial consultants,
marketing research firms, and periodical
digests relating to an industry.
The Idea
Techniques for generating new product idea
I. Attribute listing– this method requires
generating a detailed list of the major
attributes of the existing product and
envisioning modifying each attributes by
maximizing, minimizing, substituting or
rearranging, and generating new combination
to improve the product .
e.g.. electric screwdriver was a result of
studying a basic screwdriver and modifying
the attribute of manual rotatory motion.
The Idea
II. Forced relationships
 This method considers several products
simultaneously, examines the
interrelationship of these products with
each other in the group, and examines the
interrelationship of these products with
each other in the group, and generate
alternatives that combine functionality
into a single new product.
 E.g. Industry convergence.
The Idea
III. Morphological Analysis
 This technique involves creative problem solving by
examining a problem or objective, then singling out the
most important dimensions of problem and analyzing
the interrelationships among them.
Type of Vehicle Medium of travel Power source
Cart, chair air, water, rail electric ,magnetic
wagon
IV . Brainstorming
 This method is oriented to generating idea primarily in
free flow fashion. Generally limited to 6 people and 1h, a
session consists of leader defining the problem to be
solved specifically as practical and encouraging idea
generating with a rule of no criticism.
The Idea
2. A new product concept must be tested to be
refined.
 Rome was not built in a day; so too with
new product ideas and their translation
into new business.
 Ideas become refined with three major
factors influencing their refinement: the
passage of time, the venue of
consideration, and frequency of review.
The Idea
3. Third Party influence and feedback is Key
 The key to value feedback is to get
informed responses as distant as possible
from the source of idea generated.
 This will result in an unbiased assessment
of the concept, and also allow the new
product manager to draft the promotional
material and present it to see if the story
work.
The Idea
4. Primary customer contact has big payoffs
 It provides direct product feedback in
terms of features, pricing an configuration.
 It provides feedback on how the customer
perceives your firm in designing,
manufacturing, and marketing this
product.
Competitive Analysis-
Structuring the Advantage
1.Evaluate the competition prior to product
definition
 The comprehensive competitive comparison
chart should be done at project inception., and
another one done at the time of product launch.
 The one done at the inception will be required
to define the product. The updated one at
product launch will update the file and yield
fresh information to sales team
 There are 4 major types of competitive
players in the market place and are easily
recognizable.
 It is important to categorize the individual
competitors posture on the competitive
comparison chart and understand their
strategy
A.Defensive Orientation posture
 is based on the market leader position
whereby the major market share is already
controlled and objective is to prevent
abdication of the share to anyone else. main
 Their salient point of operation are that only
the market leader can play a defensive game.
 The need is to maintain the market share by
attacking themselves as other one would
attack them, only doing it first and
establishing countermeasures to maintain the
share
B direct Pursuit Orientation posture
 Is based on competitors that are generally
number 2 or 3 in the marketplace. They are
interested in growing market share by
taking it from leader`s share .
 Their main consideration is the strength of
leader`s position. They are most successful
when they find the inherent weakness in
the leader`s strength and attack at that
point
C. Oblique Pursuit Orientation
 Is designed to seek out an uncontested
area. Its major tactic is surprise. Since it is
a surprise initiative, the pursuit of business
is as important as the attack itself
 Many of these launches are manifested by
developing functional alternatives to
solving the problem, currently solved by
the defensive player.
D.Opportunistic Pursuit Orientation Posture
 It is generally a small, company orientation and is
manifested by ability to mobilize and serve market
needs with originality and speed.
 The player need to find a segment small enough to
stake out and defend. They should also never
forget that no matter how successful they are in
specific niche, they are to never act like a leader. If
the playing field for that niche becomes hotly
contested, they must be prepared to bug out at a
moment`s notice.
2. List of competitors and attributes
 The competitive comparison chart is an
invaluable tool in positioning the new
product in the market place.
 A properly prepared chart outline feature,
specification items, costs, pricing , target
segment,perciived strategy, channel to
market, effectively of channel, relative
standing and overall aggregate rating.
3. Functional alternatives to solve the problem
 An entrenched competitor need not be
invincible. The primary driver in the sales
transaction is satisfaction of customer need.
 If there is an alternative way to solve the
need, new market niche may be created by
those market constituents who accept the
alternative, this can allow participation in
markets that otherwise would be inaccessible
4. Engineer The Competitive Advantage
 The competitive advantage cannot be
added o at the end of a program. Added
features or other inducement to invoke
market acceptance.
 To successfully beat the competition, a
watchful eye must be kept on them during
the development process, and a delicate
balance must be struck in adding features
to keep ahead and .
The Route to Market
1. What is the Route?
 Every company needs to have a sales
channel. Are they company owned
store? ,distributor, resellers , or agent? Each
channel exists for a purpose and each one
has benefits and drawbacks
 Effectiveness of channel plays a vital role
in new product success.
The Route to Market
2. Where lies its strength and Weakness?
3. Determine Motivation at each step in the

chain, Where does the money flow?
4. Keep as close to the customer as possible
while maintaining coverage and leverage.
5. Test the Route
Strategy and Tactics in
Operational Planning
1. How the new product will be presented to
the market place
 How to prepare your organization to tell
the new product story in the marketplace.
 What makes your firm think it is the firm
of choice to develop and introduce this to
the marketplace?
2. What must be done within the organization to
prepare for the new venture
3. What prerequisite are to be implemented

 While visualizing future of product, it is
easy to visualize the corporate shortfalls and
how they can negatively impact the program.
4. What tactics will be used to introduce and shift
loyalties
 As a part of new product development, the loyalitis
must be changed by your organization`s action.
 What will these tactics be- price, quality, service,
knowledge, availability?
 Bring some exciting, special, and of higher value
to the customer base launch with this and keep the
pace difficult for the competition to catch up.
Background/Format
1. Track Record of the Business
I. What has the company traditionally been
good at?
II. What type of programs have historically
failed, and why?
III. Are the same presumption still true today?
IV. Trace successful programs and cite their
contributions to the success
Background/Format
2. Preparing an operational plan for the new
product
3. Integration of Tactics to execute a workable
plan
4. Determine Risk
A. The Scope of program- Investment
B. How achievable is the program, chance of
success?
C. What is the measure of acceptance of
program within the corporation? Who are the
negative participants and what is their
influence base?
Background/Format
6. Managing Risk
A. Be attentive to negative trends, issues, and
problems that start out small and grow
B. Manage today and look ahead to
tomorrow. Look for the possible issues
that have their origins in today's activities
and could fester into tomorrow problem
C. Act quickly to mitigate any damage that
may have already occurred.
The Product and Business
Plan
The product and business
plan
 It deals with the planning of the new

product opportunity within the framework of
business.
 After getting a new product concept and
refining it into a product opportunity, its time
to find out its capability of generating
revenue and capturing market share.
The Plan
1. Elements of a business plan
 The business is a mean of obtaining the
funds, in addition to serving as a road map
for the development of the business.
 The business plan needs to be written such

that it can initiate the appropriation of
sufficient funding to execute a program.
The Plan
2. Formula of Success
 Each product opportunity will require
different treatment, analysis, and planning.
 If there is a formula of success in preparing a

business plan, it is in factoring in objectives,
the opportunities, and the contingencies into a
cohesive, executable plan and sticking to it
through completion.
The Plan
3. Touch all areas of business initially so as
to integrate; otherwise, new product
development will not be absorbed by the
business.
4. Review the Plan Elements

The Plan
A. Executive Summary
I. Business mission statement
II. General market information
III. Brief statement about competition
IV. Critical factors of success
The Plan
B. State of the company
I. State of business
a) External review perspective
b) Internal review perspective
c) Corporate objectives
d) Management team description
The Plan
C. The market and its need
I. Introduction
II. Industry trend
III. Market description
IV. Market trends
V. Market members/segments
VI. Market growth and stability
The Plan
vii. Competition analysis
a) Domestic/ Global
b) Functional displacement
c) Sensitivity to external partnerships
The Plan
D. The Products
 The plan must contain description of how you
will develop these products on time and on
budget.
 How you go from an opportunity to profitable
product.
 What are the product description?
 Define the scope, boundary, and use of
products in this description
 What is the cost structure of the products and
will they generate profit?
The Plan
 Finally , develop and present a detailed
product development schedule and
timeline showing expected progress and
measurable milestone.
 The development plan should include
a) Schedule with dates, and timeline
b) Fund expenditure with timeline
c) Critical factors for success
d) technology basis for the product.
The Plan
E. Manufacturing
a) Describe who will manufacture the
product.
b) Describe what manufacturing systems
will be used.
c) Describe how the labor force will be
trained.
The Plan
F. Marketing and sales
a) rout to market and its cost
b) how the customers will be targeted and

include a typical expected timeline for
sale, from the introduction to the
acceptance of the product
c) who will market and sell the product

The Plan
G. Product Launch
 How and when the product launch will take
place
 Cite expected initial sale and forecasted
demand
 Project how the competition will react to the
product launch.
 Develop and present countermeasure plans to
sustain momentum
 Describe the expectations of the channel
participants and their expected performance
for the company
The Plan
H) Program financial specifics
I. Development budget requirement
II. Manufacturing budget requirement
III. Marketing budget requirement
IV. Sales forecast
V. Revenue projections
VI. Profit projections
VII.Balance sheet impact
VIII.ROI
IX. Risk analysis
The Plan
I. Contingencies
J. After market plans

Product Mix/ offering
1. How will the product will broken out( cost,
structure, modules, line completers, sizes)
2. Margin Planning and Enhancement

Pricing Policy
1. Background of Pricing
 So what`s it worth to you?
 Pricing should reflect the perceived value in

the eyes of the consumer, or what it is worth
to the customer? pricing is a fundamental
component to the successful execution of the
business plan.
Pricing Policy
2. External/ Internal structure
 Internal requirement/ external limits
 Objective of pricing
a) Sales objective
b) Profit objective
c) Competitive objective
Pricing Policy
3. Pricing strategies
a) cost- based strategies
b) Demand based strategies
c) competiton
Testing the Market
1. Constantly assess your new product
position
2. Test the marketability, pricing, and timing
3. Update competitive analysis and

extrapolate changes, project competition at
launch
The customer is part of the
plan
1. Depending on the product, involve
customers early in the process
2. A good customer will tell you things you

can`t learn elsewhere
Selling the plan
1. Getting the audience
2. Generating enthusiasm
3. Trial balloning
Presentation
1. Overview
2. Opportunity
3. Product Description
4. Strategy and Implementation
5. Call to action
Justifying a program: The
Accounting Viewpoint
Introduction
 Theaccounting viewpoint is quite different
from the new product developer viewpoint.
 When adopting the stance of the accountant,

you must address all the nuts and bolts of
financial analysis and understand the
financial perspective of decision making
Accounting and finance as
partners, not Adversaries
1. Accounting perception of new product
development
2. Formulas, result, Expectations
3. Narrative of Similar Programs

Accounting and finance as
partners, not Adversaries
4.Zero tolerance for failure or delay
5. Technology advantaged / Disadvantaged

personnel
6. Product development`s role: Facilitate

understanding
Generating Cash and Profit
1. Impact of Route to Market
2. Impact of Economic Cycles
3. Read Management well to see how fast it

reacts
4. Watch the health of the business.
Cost, Volume, profit, and
break-even
1. Break-Even Analysis
2. Single – product company/ contribution to

profit model in larger companies
3. Inventory: The hidden cost

Financial Models for Sales
Transactions
1. Direct sales Model
2. Representative sales model
3. Distributor or value-added reseller sales

model
Starting Out
Introduction
 You have secured funding for the new product
development program and are ready to start
out. Now it is good time to select the team.
 The development team is highly important
element of the development process, as it is
people who generate progress and results.
 The other crucial elements are team
management and communications-including
communication within the development team,
laterally within the organization, and externally
to the organization.
A statement about teamwork
1. Teamwork
 A team is a work in progress, in which the
objective focuses the actions of individuals
 In a team , the needs of the corporation
outweigh the needs of the individual.
 A team is a forum for individual
contribution to an aggregate goal.
A statement about teamwork
2. Most managers don`t understand the
concept of a team
 They give the `teamwork speech` and
expect to have a disjointed group of
people with differing agenda suddenly
perform as a cohesive unit.
3. Team work doesn`t happen naturally
4.Only the leader is to blame
Identifying The Requirements
1.Identify the Resources
 What are resource required to initiate and
complete the program?
 What is the mix of internal and external
expertise that will be needed?
 What are the capital resources needed, and
when will they required?
 Is there a learning curve for the capital?
All of these essentials must be
sequenced and coordinated.
2. Organize the PERT chart
Task 1 Task 2 Task 3
Resources Resources Resources

Personnel Personnel Personnel
Equipment Equipment Equipment
3. Review Process questions for planning
A. Write the planning statement
 What are the desired result or outcome?
 What are the measurements of success?
B List the action step in the plan, identify
timing, and assign responsibility
C. Review each step in the plan and identify
the critical areas
D. Identify and list likely causes of key
potential problems
 what are the specific influences or events
that can cause these potential problems?
E. Develop preventative action
F. Design contingent actions
G. Identify and list contingency points

Assembling the team
Members
1. Makeup of the team
 Certain personalities can enhance success or
contribute to failure.
 Members with exceptionally strong
personalities can undermine the team leader
 Each team needs a blend of creative people
and pure implementers
Assembling the team
Members
2. Aligning the team
3. Get required Talent
4. Obtain team member with drive

Organizational Form
A. Types of organizational formats
1. Line or functional Organizational format
 In line or functional form, a group of projects
is assigned to the functional manager in the
standard hierarchical structure.
 Benefit of this method is that one manager for
all the projects directly applies the the
resources to the program
Organizational Form
2. Pure project form
 In this form of organization each project is self
contained and resources are assigned to a
single project for execution.
 Member don’t work on anything other than the
project.
 This is probably the most efficient form for
executing a program. It focuses the
development horsepower directly on the task at
hand with no compromise
 There is a single mind focus, which helps a
team be highly effective.
Organizational Form
3.Matrix form
 Development personnel are located in a
resource pool. Assignments are given to the
pool, and talent is assigned on availability.
 This form is most comfortable for senior
management to support throughout a
program because the ratio of projects to
people seems better.
Organizational Form
A. Selecting the right form
B. Making do with existing organizational
formats
C. Meet the program needs, not organizational
preferences
D. Making do with existing organization
formats
E. Meet the program needs, not organizational
preferences
Management of the team
1. System for program management
 Gant Chart
 PERT Chart
2. Model for Program management
 Market assessment and internal assesment
 Prototyping
 Core development and testing
 Industrialization
 Commercialization
 optimization
3.Internal, external and combination resource
management
4. Managing uncertainty in a program
5. Dynamics of schedules, timing progress,

and slippage
6. Managing for result
 What are the practices that the group and
company need to follow to become an
effective development team?
 Development and use of common
methodologies for evaluations and
decision making
 Establishing and supporting a process for
determining priorities
7. Follow-up System
 Item no.
 Description
 Action required
 Assignment date
 Responsibility
 Completion date
 Running status
Culture of the group
1. Set the pace- senior management and team
2. Watch the first obstacle
3. Variable work effort applied to variable

workload
Culture of the group
1. Incentives
 Personal/Professional
2. Relate time and quality of work to

incentive
3.Recognition of Players
4. We win or loss together

Management Reporting
1. Set a good accurate, easy to use reporting
system
2. Lay out program in detail

• Funding
• Logic
• Timing
• Resources
• Equipment
• Technology
• deliverables
3. Regular status meeting
 It establishes consistency in progress
assessment
 It establishes accountability for the
individuals team members
 It assists in identifying upcoming issues
 It provides a forum for discussion on
resolving problems
4. Product maintenance versus development
5. Periodic management report

a) Product status report
b) Project status report
c) General business condition

The Program Initiation
1. Establish the start and end date
2. Make use of training as part of program
3. One step at a time
4. Have Fun
5. Lets go
Executing the plan
Introduction
 Time for planning is at an end; the effort is
now focused on the execution
 Once the program is in motion, it involves an
interdisciplinary watch over timing,
functionality and product cost.
 Problems will befall the development if the
program demands the new ground to be
covered
Introduction
 It is in the best interest of the program to
deal with them effectively to enable on-time
delivery of successful product.
 Documentation is often overlooked, but this
omission often comes back to haunt the
team in some way or other.
Mechanics of product
development
1. Flowchart Development
2. Timing resource and creativity to meet the

objective
3. Program Management
 Inner Loop
 Outer Loop
Managing People
1. Project management is people
management
2. The unpredictability factor in personnel
3. Managing Technological risk

Product development phases
• Stage 0: Market assessment and internal assessment
• Stage1: Prototyping
• Stage2: Core development and testing
• Stage3: Industrialization
• Stage4: Commercialization
• Stage5: Optimization
•
Stage 0: Market assessment and internal
assessment
1. Market Opportunity Analysis
2. Competition Analysis
3.Product concept
4. Feasibility study
5.Company Strategy
6. Fitability Study
7. Timing
8.Timing
9.Market dynamics Asssessment
10. Go or no-go decision
11. Market requirement specification
Stage1: Prototyping
 It is the physical embodiment of a product
concept as a starting point.
 This is the stage at which the product
concept evolves into a piece of hardware
that is functional
1.Preliminary design specification
 It is development`s response to functional
specification, which represents the voice of
customer
2.Intellectual property review
 To prepare patent review to determine whether
there are an patent issues outstanding or
whether there is potential conflict with existing
patents.
3. Design Strategy
 It deals with issues such as selection of
technology, degree of risk, product
reliability needs and cost.
4.Test strategy
 It is a plan for how the new product will be
tested. It correlates closely with the design
strategy, as both are technology dependent.
5.Quality Plan
 It is plan for the quality claims of the
product throughout its life cycle.
 The quality of a product is strictly a
measure of how accurate and repeatable the
final product is coming off the production
line.
6. Reliability Requirement
 It is a measure of how long and how
accurate a product will perform its intended
function.
 This is a measure of the value in use that
the consumer will obtain from the product.
7. Cost analysis
8. Capital requirement plan
9.Final design specification
10. Alpha unit developed
 Alpha is designation for the engineering
prototype. It may be made in a lab, without
tooling or specialized parts.
Stage2: Core development and testing
1. Criticality analysis
 it is an exercise in determining the degree to
which one failure in the product could
prove critical.
2. Safety review
3. Preliminary Forecast
 ROI
 Commitment perspective
4.Beta Unit
5. Pilot run plan
 It is the first practice production run of the
product
6. Design review results
 This is a formal design review process in
which all of the plan and certification
efforts undergoes a peer review.
7. Pilot run results
8. Final production strategy
9. Final test strategy
10. Final quality Plan
Stage 3: Industrialization
1. Capital Equipment and setup
2. Manufacturing setup
3. Tooling and equipment qualification
4. Final pilot run
5. Product certification
6. Field test data and feedback
7.Final cost evaluation
8. Finalize marketing strategy
9. Prepare launch Plan
10. Initial stock in place
Stage 4: Commercialization
1. Final competitive assessment
2. Final literature
3. Forecast for product
4. Sales channel initiation and training
5. Customer visit schedule
6. New product release
Stage 5: Optimization
1. Field feedback plan
2. Manufacturing feedback
3. Value management
4. Product evaluation analysis
5. Cost reduction
6. Product obsolescence
Problem Solving
 The ability to employ effective problem
solving skills is a major requirement for the
group
1.The goal: focus on short term and long term
simultaneously
2.Problem solving categories
 Issue review
 Cause assessment
 Decision management
 Planning architecture
Problem Solving
1. Issue review
a. Examine the process and observe the broad
or complex concern.
b. Separate the concern into distinct issue
 How does the collection of concern relate
to each other and to the higher-level issues
 Is there more than one issue involved
 Will one action resolve or cause explain
the issue
Problem Solving
 What evidence surrounds the issue
 How can you be more specific
3. Categorize and break down larger issues into root
issues
 What is the relative importance of each single
issue?
 What is the impact/ seriousness/urgency of the
effect of each issue
 How is each issue changing as the time progresses
 Based on impact, urgency, and trend, what is the
hierarchical order of the concern
Cause Assessment
1. Describe the problem
 In what context issue is observed?
 What exactly is wrong?
 When in the life cycle of the context was the
first issue observed?
 State any correlations in the examined issue.
 Quantify how much of the context is
defective.
 Quantify how many issues are occuring?
 What are trends?
Cause Assessment
 What are the similar circumstance might
we expect to see this issue, but do not?
 What similar issues might we expect to see
but do not?
 At what other locations might we expect to
see but do not?
Manufacturing Development
Introduction
 The development of the product is not only limited
to the design of the product; it must also include
the development of the manufacturing system.
 The efficiency of the manufacturing system is a
measure of how well the organization can
capitalize on the new product development.
g
Introduction
1. Manufacturing- The forgotten development?
 Manufacturing development is an integral
part of the new product development process.
 Often, development occurs in a
manufacturing vacuum, with the result that
the new product might suffer lower than
expected gross margin, might fail to
capitalize on the market opportunity entirely.
Introduction
2. Manufacturing as part of the product
development
 The importance of integrating the
manufacturing process into the product
development process can not be overstated.
 There are tradeoffs between design and
manufacturing that must be reconciled as
part of development project, rather than in
in production, where cost usually increases.
Integration of multiple disciplines into
the development process
1. Diagram flow of multiple disciplines into
the development process.
2. Give and take between manufacturing and

development
3. Manufacturing can`t fix what development

doesn`t provide for
Integration of multiple disciplines into
the development process
5. Considering the diverse and fast changing
workforce.
6. Manufacturing as a competitive weapon.

Design for manufacturing
1. Philosophy
2. Minimization of parts
3. Take advantage of gravity
4. Refine processes to reduce per-unit

resource consumption.
Design for manufacturing
5. Create a process to build and ship rapidly

rather storing inventory.
6. Create a mindset of minimization through

the manufacturing pipeline.
Manufacturing, Process, Layout
1. The solution depends on the product
2. Review Industry Practices

a) Processes
b) Yields
c) Cost structure
d) Product life cycle
e) Redesign frequency
Forecasting
1. The link between the customer , sales

marketing and manufacturing discipline
2. The importance of materials, and labour.
3. Requirement for accuracy.

Prelaunch Checklist-Setting
up the Organization
Introduction
 This phase of the product development
activity deals with all of the preparation just
before product launch.
 Each of the elements is discussed to ensure
a completed program at launch, with entire
organization prepared and motivated to
achieve success with the new product.
Confirming agency
certification
1. Agency certifications are an integral part
of the development process.
2. Modifications after BETA sites test

program.
Pilot run manufacturing
1. Purpose of the pilot run
2. Perspective on the size of the pilot run
3. Degree of variability allowance
4. Measure of Performance
5. Corrective action
BETA testing Program
1. This is the report card on the entire effort.
2. Checking all elements of the planned process

 Customer selection
 Demographics of selection
 Documentation of feedback
 Deposition of feedback information
 Recommendations
BETA testing Program
3. Modification as a result of BETA testing
4. Be Specific about what you are looking for.

Literature
a) Information to make a purchase decision
b) Information to familiarize the user about the

product
c) Information to use the product
d) Information to train about the product
e) Information about warranty
Training for Personnel
1. Is the organization set up to handle the

new business?
2. Pricing/ Quotas, sales order entry, service,

and parts.
Field organization set-up
1. Sales team provides follow through on
launch.
2. Review the type of field organization in

place
3. What are the dynamics for selling and

servicing?
Field organization set-up
4. don`t launch without the sales team`s
support
5. Sales motivation and compensation.

Final Pricing
1. Field feedbacks help set pricing
2. Verify your position in the Marketplace
3. Is your product strategy still valid?

4. Rerun ROI calculation
5. Do you have a low volume, specialized or a
high-volume, standard price product?
Tying in sales order entry
systems
1.Tracking the sales progress
2. Quotas
3. Sales reports
The Launch
Introduction
 Product launch is the culmination of all the
efforts and work new product development
team has invested
 It is the decisive point in which the market
must respond to the total effort.
 Now, with all of the development, planning
and execution in place, its time for the major
thrust in getting the new product business off
the ground.
Product Rollout
1. The rollout formally launches the product
 The product rollout, or introduction, is the

formal mean to launch the new product.
 It is specially designed to get the word out to

the customers and marketplace that the new
product is available for sale, and consists of
the certain features and benefits.
Product Rollout
2. Media uses is critical to launch
3. Telling the new product story
4. Establishing momentum
5. Incentives
g
Initial Monitoring of Results
1. Models for new product rollout
2. Monthly monitoring
3. Making the strategy work
4. Checking the price/value matrix

Initial Monitoring of Results
5. Is the story getting out?
6. Overcoming obstacle
7. Energy is the only weapon at launch- use it

Product Promotion and
customer visits
1. Need and value of customer visit
2. Participation in initial sales transaction
3. Correct sales activities as required
4. g
Tools
1. Networking the sale force to your
advantages
2. Model for a prospected sales transaction
3. Pick a sales examples and drive it to

success
4. Utilize publicity to promote the new
product
Measurements
1. Establish launch goal
2. Qualitative evaluation of product sold
3. Price protection and margin retention
4. Balanced selling
5. Preventing product cannibalism

Sales channel and launch
objectives
1. Launch incentives
2. Ease of conducting business
3. Action items, follow up, completion date, and

results
4. Clearly identify the direct objective
 Achieve x amount of sales in the following
time frame, with resulting gross margin, while
maintaining the existing product sale base
Product life-cycle Marketing
Strategies
PLC Marketing Strategies
 A company`s positioning and differentiation
strategy must change as the product, market and
competitors change over the period the PLC
 PLC asserts four things
1. Product have a limited life.
2. Product sales pass through distinct stages, each
posing different challenges, opportunities, and
problem to the seller.
3. Profit rise and fall at different stage of PLC.
4. Products require different marketing, financial,
manufacturing purchasing, and human resource
strategies in each life cycle stage
Product life Cycles
Product life Cycles
1. Introduction
 A period of slow sales growth as the product is introduced in
the market, profit are non existence because of heavy expenses
of product introduction.
2.Growth
 A period of rapid market acceptance and substantial profit
improvement
3. Maturity
 A slow down in sales growth because the product has achieved
acceptance by most buyers
 Profits stabilize or decline because of increased competitions
4.Decline
 Sales shows a downward drift and profit erode
Marketing strategies at
different stages of PLC
1. Introduction Stage
 Since it takes time to roll out a new product, work
out the technical problems, fill dealer pipelines,
and gain consumer acceptance, sales growth tends
to be slow in the introduction stage.
 Profits are negative or low, and promotional
expenditures are at their highest ratio to the sale
because the need to inform potential customers,
induce product trial, and secure distribution in
retail outlets.
 Firms focus on those buyers who are most
ready to buy, usually in higher- income
groups. Price tends to high because cost are
high.
 Companies that plan to introduce a new
product must decide when to enter the market.
 To be the first can be rewarding, but risky and
expensive. To come in later makes sense if
the firm can bring superior technology,
quality, or brand strength.
2. Growth stage
 The growth stage is marked by a rapid climb in sales.
Early adopters like the product, and additional
consumer start buying it.
 New competitors enter, attracted by the opportunities.
They introduce new product features and expand
distribution.
 Prices remain where they are or fall slightly, depending
on how fast demand increases.
 Companies maintain their promotional expenditures at
the same or at the slightly increased level to meet
competition and to continue to educate the market.
 Sales rise much faster than promotional
expenditures, causing a welcome decline in the
promotional –sales ratio.
 Profit increased during this stage as the promotion
costs are spread over a larger volume and unit
manufacturing costs falls faster than price decline.
 Firms must watch for a change from an
accelerating to a decelerating rate of growth in
order to prepare new strategies.
 E.g. Men Cosmetic market in India .
During the growth stage, the firm uses
several strategies to sustain rapid market
growth
 It improves product quality and adds new
product features and improve styling.
 It adds new model and flanker products(i.e
product of different sizes, flavor, and so
forth to protect the main product)
 It enters into new market segments
 It increases its distribution coverage and
enters new distribution channels.
 It shifts from product awareness advertising
to product preference advertising.
 It lowers price to attracts the next layer of
price-sensitive buyers
3. Maturity stage
 At some point, the rate of sales growth will
slow, and the product will enter a stage of
relative maturity.
 This stage normally lasts longer than the
previous stages and posses a big challenges
to marketing. Most product are in the
maturity stage of the life cycle.
 The maturity stage divides into three phases:
growth, stable and decaying maturity.
 In the first phase the sales growth rate start to
decline. There are no new distribution
channel to fill.
 In the second phase , sales flatten on a per
capita basis because of market saturation.
most potential customers have tried the
product and the future sales are goverened by
population growth and replacement demand.
 In the third phase, decaying maturity, the
absolute level of sales start to decline, and
customer begin switching to other products.
 This phase poses the most challenges, the sales
slowdown create over capacity in industry,
which leads to intensified competition.
Competitors scramble to find niches
 They engage in frequent markdown, they
increase ad and trade and consumer promotion
 They increase R&D budgets to develop product
improvements and line extensions.
 A shakeout begins, and weaker competitors
withdraw.
 The industry eventually consists of well-
entrenched competitors whose basic drive is to
gain or maintain market share.
 Dominating the industry are a few giant firm-
perhaps a market leader, a service leader, and a
cost leader- that serve the whole market and
make their profit mainly through high volume
and lower costs
 Surrounding these dominant firm is a
multitude of market nichers, including
market specialists, product specialists, and
customizing firms.
 The issue facing a firm in a mature market is
whether to struggle to become on of the big
three and achieve profit through high volume
and low cost, or to pursue a niching strategy
and achieve profit through low volume and
high margin
 Sometimes market will become polarized
between low- and high end segments, and the
firm in middle see their market share steadily
erode. E.g. Electrolux.
Strategies
 Three potentially useful ways to change the
course for a brand are market, product and
marketing program modification
1. Market Modification
 A company might try to expand the market
for its mature brand by working with the two
factors that make up sales volume
Volume = no. of brand users x usage rate
A No. of brand user
a) Convert non user- small sachet shampoo
market in India
b) Enter new market segment
 J&J successfully promoting its baby
shampoo to adult user.
 Pears soap has introduced a pink soap
specially targeted at children
c) Attract competitors customer
B. Increase the Usage Rates Among Users
a) Use the product on more occasion
 e.g. milkmaid(Nestle) for making variety of
dessert preparations at home.
b) Use more of the product on each occasion
 E.g. drink a large glass of orange juice.
C ) Use the product in new ways
 Use aspirin daily as a medicine for reducing
chances of a stroke.
2. Product Modification
 Managers also try to stimulate sales by
modifying the product characteristics through
quality improvement, feature improvement,
or style improvement.
a) Quality Improvement
 Pillsbury Chakki fresh atta, good for family
heart, rich in fiber, more hygienic.
b) Feature improvement
 Adding new feature such as size, weight, materials,
additives, and accessories..
c) Style improvement
 It aims at increasing product esthetic appeal. A style
strategy might give the product a unique market
identity. yet style competition has problem.
 It isdificult to predict whether people and which
people will like a new style.
 A style change usually reuires discontinuing of old
style and the company risks losing customer. E.g.
New Coke.
3. Marketing Program Modification
a) Price
 Would a price cut attract new buyers? If so,
should we lower the prices through prices
through price specials, volume or early
purchase discounts, freight cost absorption or
easiest credit terms? Or would it be better to
raise the price, to signal higher quality?
b) Distribution
 Can the company obtain more product support
and display in existing outlet? Can it penetrate
more outlets? Can the company introduce the
product into new distribution channels?
c) Advertising
 Should we increase advertising expenditure?
Change the message or ad copy? The media
mix? What about the timing, frequency, or size
of ads?
d) Sales promotion
 Should the company step- up sale promotion-trade
deals, price-off coupons, rebates, warranties, gifts and
contests?
e) Personal selling
 Should we increase the no. or quality of salesperson?
Should we change the basis for sales force
specialization? Revise sales territories of sales force
incentive? Can we improve sale call planning?
f) Service
 Can the company speed up delivery/ can we extend
more technical assistance to customers? More credit?
4. Decline Stage
 Sales decline for a no. of reason, including technical
advances, shifts in consumer tastes and increased
domestic and foreign competition..
 All can lead to over capacity, increased price cutting
and profit errosion,
 As sales and profit decline, some firm withdraw from
market. Those remaining may reduce the no. of
products they offer
 They may withdraw from small market segments and
weaker trade channels, and they may cut their
promotional budgets and reduce prices further.
Product Portfolio Analysis and
Management
Product Mix
A product mix is the set of all products and items a
particular seller offers for sale
Product width
 The width of a product mix refers to how many
different product lines the company carries. HUL is
having 12 lines
Product Length
 The length of the product mix refers to the total no
of item in the mix (28 items in HUL)
Product Depth
 The depth of the product mix refers to how many
variants are offered of each product in line. If Lux
comes in 4 variant and 2 size then product depth is
8
Product Mix Width
Home and Personal Care Foods

Ayurved Ice
personal Laundry Skin Hair Oral Deo ic Color Tea Coffee Foods Cream
Cosmeti
wash Care Care Care personal c
&
Product Health
Line Care
Surf Pepsoden Brook

Length Lux Excel F&L Sunsilk t Axe Ayush Lakme Bond Bru Kissan Kwality
Lifebuoy Rin Ponds Clinic Close-Up Rexona Lipton Knoor Wall`s
Liril Wheel Vaseline Annapurna
Hamam
Breeze
Dove
Pears
Rexona

Product Management 2

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Product Management 2

Enviado por

Direitos autorais:

Formatos disponíveis

New Product Management

BY: MUKESH MISHRA

Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 20-7

Current 1.Market 3. Product

Existing New Category

Existing brand 1.Line 2. Brand

1.How does it use and generate cash, profit,

1 . Upsetting the playing field to your

1. NPD as a survival means in the market

1. Identifying the opportunities that contribute

3. Determine Motivation at each step in the

3. What prerequisite are to be implemented

 It deals with the planning of the new

 The business plan needs to be written such

 If there is a formula of success in preparing a

4. Review the Plan Elements

b) how the customers will be targeted and

c) who will market and sell the product

J. After market plans

2. Margin Planning and Enhancement

 Pricing should reflect the perceived value in

 Internal requirement/ external limits

3. Update competitive analysis and

2. A good customer will tell you things you

 When adopting the stance of the accountant,

2. Formulas, result, Expectations

3. Narrative of Similar Programs

5. Technology advantaged / Disadvantaged

6. Product development`s role: Facilitate

2. Impact of Economic Cycles

3. Read Management well to see how fast it

2. Single – product company/ contribution to

3. Inventory: The hidden cost

2. Representative sales model

3. Distributor or value-added reseller sales

Task 1 Task 2 Task 3

Resources Resources Resources

G. Identify and list contingency points

3. Get required Talent

4. Obtain team member with drive

5. Dynamics of schedules, timing progress,

2. Watch the first obstacle

3. Variable work effort applied to variable

2. Relate time and quality of work to

4. We win or loss together

2. Lay out program in detail

5. Periodic management report

b) Project status report

c) General business condition

2. Make use of training as part of program

3. One step at a time

2. Timing resource and creativity to meet the

2. The unpredictability factor in personnel

3. Managing Technological risk

2. Give and take between manufacturing and

3. Manufacturing can`t fix what development

6. Manufacturing as a competitive weapon.

3. Take advantage of gravity

4. Refine processes to reduce per-unit

5. Create a process to build and ship rapidly

6. Create a mindset of minimization through

1. The solution depends on the product

2. Review Industry Practices