1. Product Planning and Development

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IntroductionProduct & Brand Management

Ranjan [email protected]

Cell: +91 9810184804

NEW PRODUCT PLANNING

KENNETH B KAHN

IntroductionNew Product Planning

Planning Development and Launch

IntroductionTwo Processes

Product Development:

– ‘up-front’ process where product / service is

conceived, developed, produced, tested

– Occurs prior to formal offering of the product /

service to the market place (launch)

Introduction

• Product Management:

– ‘back-end’ process where product / services are

commercialized, sustained and eventually

withdrawn

– Include launch endeavor along with all activities

that occur after launch

Two Processes

IntroductionWhat is a Product?

A product is anything that can be offered to a

market to satisfy a want or need, including

physical goods, services, experiences, events,

persons, places, properties, organizations,information, and ideas.

IntroductionComponents of the Market Offering

Attractivenessof the market

offering

Value-based prices

Productfeaturesand quality

Servicesmix andquality



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IntroductionFive Product Levels IntroductionThe CORE Product

• Is NOT the tangible, physical product.

• You can't touch it.• That's because the core product is the

BENEFIT of the product that makes it valuableto you.

IntroductionThe AUGMENTED Product

• Is the non-physical part of the product.

• Consists of lots of added value, for which a

premium may or may not be paid

IntroductionProduct Classification Schemes

Durability

Use

Tangibility

IntroductionDurability and Tangibility

Nondurable

goods

ServicesDurable

goods

IntroductionConsumer Goods Classification

Convenience

Unsought

Shopping

Specialty



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IntroductionTypes of Consumer Products

• Convenience• Shopping

• Specialty

• Unsought

• Frequent purchasesbought with minimal

buying effort and little

comparison shopping

• Low price

• Widespread

distribution

• Mass promotion by

producer


• Convenience

• Shopping

• Specialty

• Unsought

• Less frequent purchases

• More shopping effort forcomparisons.

• Higher than convenience

good pricing

• Selective distribution in fewer

outlets

• Advertising and personal

selling


• Convenience

• Shopping

• Specialty

• Unsought

• Strong brand preference

and loyalty, requires

special purchase effort,

little brand comparisons,

and low price sensitivity

• High price

• Exclusive distribution

• Carefully targeted

promotions


• Convenience

• Shopping

• Specialty

• Unsought

• Little product awareness

and knowledge (or if aware,

sometimes negative

interest)

• Pricing varies

• Distribution varies

• Aggressive advertising

and personal selling by

producers and resellers

Introduction

• On an average, top-quartile performers

generate 20 percent more revenue from new

product introductions than companies in the

bottom quartile.

• High-performance businesses are also

distinguished because they introduce more

new products than competitors do, and

• They bring them to market five times faster.

High Performance of FMCG Cos. Introduction

AMR Research 2008



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Introductionc

• difficulty of getting an accurate

read on consumer needs• gleaning insights from all the right

data

• identifying and mastering thecomplex capabilities and processesrequired for innovation.

Introduction

• Actionable consumer insight through better analyticalmethods both to uncover unmet needs in mature and

emerging markets—and to derive real insight fromreadily available commercial intelligence.

• Adopting a more open, robust and repeatable modelfor customer insight gathering, idea generation andnew product development that imposes process whileincreasing speed to market and speed to scale.

• Using product life cycle management and portfolio

optimization strategies more rigorously to maximizetop line profitability.

Develop

IntroductionInnovation Process &

Capabilities

Accenture

IntroductionSuccessful Product Planning

Companies

• They have clearly defined goals

• They seek future customer needs

• They build organizations dedicated to

accomplishing focused goals

• They partner with customers in the

development process

IntroductionProduct Success Measures

Customer Based:

– Customer satisfaction

– Customer acceptance

– Number of Original Customers

– Unit Volume

– Number of repeat customers

Fin & Page 1996

Introduction

Competitive Based

– Market Share

– Competitive benchmarks

– Competitive advantage

Product Success Measures

Fin & Page 1996



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Introduction

Financial:

– Revenue – Profit

– ROI

– Payback period


Fin & Page 1996

Introduction

Technical Performance

– Performance specs. – Speed-to-market

– Development cost

– Quality

– On-time launch

– Innovativeness


Fin & Page 1996

IntroductionGood Marketing is No Accident

The roaring successof four-wheeler Tata

Ace, in a marketearlier dominated bythree-wheeler load

carriers, was due to adeep understandingof the market needs

and customerrequirements.

IntroductionThe Insight

• Recognized a gap in the market for small

commercial vehicles

• An era where there is a need is to transport

goods speedily, conveniently and in a cost

effective manner, while providing comfort,

style and easy maintenance

• Result: India's first mini-truck.

http://ace.tatamotors.com/BG.html

Introduction

www.tatamotors.com

c IntroductionProduct Attributes That Meet

Consumer Needs

• Ideal for short, narrow village

roads as well as long highway haul

• For small bulky loads and large

heavy ones, the Ace is aninnovative 4-wheeler offering for

the first time in this category.

• The small exterior belies the

power-packed technologically-

superior engine which gives the

Ace high power and high loading

capacity.



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IntroductionImpact in the Market

A new revolution in transport, which is set to

change the competitive landscape of the smallcommercial vehicle segment. Tata Ace - the

small, big machine.

IntroductionThe ‘one-lakh’ Name Plate

0 20000 40000 60000 80000 100000 120000

2005-6

2006-7

2007-8

2008-9

2009-10

2009-10 (Magic)

IntroducedMay 2005

IntroducedJune 2007

IntroductionCorporate Strategy Framework

MISSION

OBJECTIVES

STRATEGIES GOALSPROGRAMS

Introduction

Line ExtensionsProduct Improvements,

cost reductions

New usages, new

marketsNew to the company &

the world

IntroductionThe Product Development Process

• Idea directed product development – systematic vs.

haphazard

• Market Pull vs. Technology push

• Purpose of systematic product development processis to:

– Transfer technology to a commercial application

– Mate technical characteristics with market needs

– Integrate multiple functional efforts to create product

– Implement company strategy via NPD

– Provide management control without being intrusive

IntroductionThe Stage Gate Model™ of Product

Development



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Introduction

Stage0 -

Discovery: Activities designed to discover opportunities and to generatenew product ideas.

Stage1 -

Scoping: A quick and inexpensive assessment of the technical merits of theproject and its market prospects.

Stage2 -

Build Business Case: This is the critical homework stage - the one thatmakes or breaks the project. Technical, marketing and business feasibilityare accessed resulting in a business case which has three main components:product and project definition; project justification; and project plan.

Stage3 -

Development: Plans are translated into concrete deliverables. The actualdesign and development of the new product occurs, the manufacturing oroperations plan is mapped out, the marketing launch and operating plans aredeveloped, and the test plans for the next stage are defined.

Stage4 -

Testing and Validation: The purpose of this stage is to provide validationof the entire project: the product itself, the production/manufacturingprocess, customer acceptance, and the economics of the project.

Stage5 -

Launch: Full commercialization of the product - the beginning of fullproduction and commercial launch.

d Introduction

IntroductionStages of the Product Development

Process

• First Stage - Opportunity Identification

• Second Stage – Concept Generation

• Third Stage – Pre-technical Evaluation

• Fourth Stage – Technical Development

• Fifth Stage – Launch

• Sixth Stage – Life Cycle Management

IntroductionCriteria for good PDP

• Some structures of checkpoints for making decisions

and committing resources

• Substantial degrees of freedom for the product

development team

• Flexibility to changing conditions

• Success in passing especially critical points of

development

• Integration of the team with the rest of the firm

• Facilitation for smooth launch

• Provision for organization learning

Introduction IntroductionSeveral Abuses

• Too much faith in the product being

developed

• Lack of concern for the customer

• Faulty research (skewed findings)

• Incorrect result from good research

• Meeting of technical & some customer needs

but not all customer needs



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IntroductionImplementing a PDP

Paul J. O’Connor’s Five Step Process• Lay the foundation

• Gain initial commitment

• Effect change

• Work the transition

• Monitor and improve

IntroductionOngoing PDP

• Optimizing & validating the process

• Gaining top management commitment &involvement

• Structuring Decision Making

• Developing new product development leader & high-

performance teams

• Training for critical skills and knowledge

• Optimizing the portfolio

• Linking & positioning the process

IntroductionEvaluating PDP

• Statistical methods for ongoing process

IntroductionNew Product Development

Opportunity Identification

Introductionx

• Not all companies indulge in strategic planning

• Most opt for opportunity identification at the

start of the product development phase.

IntroductionSources of Opportunities

• Underused resources:

– Excess production capacity

– Line & product extensions based on production

system’s ability to handle greater variety.



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• New Resources

– Development of new skills & technologies – Corporate acquisitions


• External Mandates

– New Government regulations – Self imposed industry standards


• Internal Mandates

– Upper management mandates

IntroductionBreakdown Structures

• Segmenting total market

• Segmenting respective technology

IntroductionMarket Segments

• Size: In terms of potential sales to make it worthpursuing

• Identification: Possibility to recognize and describethe segment

• Access: Feasible to contact / target in an efficientmanner

• Different Response: Unique responses to differentproduct attributes

• Coherence: homogeneous / have same preference

• Stability: No drastic changes in the near future

IntroductionDemand Types

• Homogeneous: Relatively similar demands

across customers – common approach

• Diffused: Different reasons for purchasing the

same product

• Clustered: Distinct demand among subsets of

customers within a given market



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IntroductionBreak Down Structure by Markets

Corrugated BoxMarket

PerishableProducts

West India

Keep Water Out

Ease ofHandling

East India

Non-PerishableProducts

Non-InnovativeFirms

Non-InnovativeFirms

Work-in-ProgressStorage

Finished GoodsStorage

IntroductionBreakdown Structure by Technology

Stapler

Light Duty

PlasticStaples

MetalStaples

HeavyDuty

WaterProof

Non-Conductive

IntroductionProduct Development Charter

• Identified potential opportunity needs to be

described

• Provide a mission statement via a Product

Development Charter

• Product Innovation Charter – Crawford 1997

• PDC is essentially a general statement

identifying what the specific product

development initiative is to achieve and the

guidelines

IntroductionCorporate Strategy

Strategic Business Unit

Product Development Centre

Product Platform Strategy

Product Development Charter

Product Line Strategy


Product Development ProjectStrategy


IntroductionElements of a PDC

– Background

– Arena

– Objectives / goals

– Special Guidelines

IntroductionBackground

• Provides the rationale for the product

development initiative

• The intended market and/or industry in which

the initiative will be focused should be

identified



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IntroductionArena

• The core competency of the company

• Identifies those competencies to be emphasized inthe product development initiative

• Competence could correspond to:

– Marketing

– Financial

– Production

– R & D

– Combination of above

IntroductionObjectives / Goals

• The ultimate benchmarks by which the

initiative will be measured.• Profit, growth, market status, competitiveness

and so on may be recognized

IntroductionSpecial Guidelines

• A ‘catch-all’ category

• Any extra information that should be

considered

• Could include special features, elements of

the marketing plan, key success factors

Introduction

Background

Children caninjurethemselveswith regularhouseholdstaples

Plastic staplesare less

expensive

Arena

Thecompanyhas a

corecompete-ncy instapler

manufac-

turing

Goals

Thecompany wantsa 20%returnoninvestmentwithin 2

years

SpecialGuidelines

Staplesshould bemade ofrecyclableplasticmaterial

c

IntroductionScreening PDCs

• Management must decide which charters are

more valid

• Two criterias: Technology & Market

• Assess on a scale

IntroductionSome Market Related Criteria

• Market demand for theproduct

• Market need for theproduct

• Uniqueness of theproduct

• Competitive advantage

• Ability to explainproduct to customers

• Ability to demonstrateproduct

• Trade channel for theproduct

• Company’sunderstanding of theproduct market

• Customer acceptance of the product

• Synergy with currentproducts



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IntroductionSome technology Related Criteria

• Uniqueness of technology

• Potential length of thelife cycle of thetechnology

• Ability to develop thetechnology

• Ability to patent thetechnology

• Ability to keepdevelopment costunder control

• Ability to keepdevelopment time short

• Ability to manufacturethe technology

• Applicability of technology to futureproducts

• Ability to reducepotential risk associatedwith technology.

Documents

1. Product Planning and Development