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INNOVATIVE PRODUCTS & THEIR MANAGEMENT:

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GENERATION OF IDEAS :

Formidable arrays of idea-generation techniques are at the marketer's disposal. Each technique has its assets and liabilities, but no one technique is universally better than the others. Although all firms should strive for an orderly, market directed approach, they are constrained by their individual situations. A manufacturer of aircraft, needing a new type of altimeter, might find his best answer in synaptics. Large well-heeled firms with market research departments might find rigorous benefit-structure analysis a viable alternative, and maximize their investment using it. Smaller, poorer firms may have to make do with less elaborate research and more individual creativity; perhaps through brainstorming or transfer analysis. Finally, one should note that some of these techniques might be used effectively in tandem. Conjoint analysis might be of use in converting a vague product idea into a product concept acceptable to the market. Clearly, a creative approach is needed for the creative process.

Development process:

Sometimes, innovations are by accident or luck, such as the vulcanization of the rubber, process discovered when a rubbery mixture was spilled on a hot stove. The world's first and, perhaps, the only floating soap, Ivory, was just made when a mechanical` mixer was left on overnight and whipped up raw soap materials into a light cleanser. However, these days, when innovations require sizable financial investments and other resources for support and commercialization, most innovations come from serious research and development efforts undertaken with the support of formal organizations. The hobbyist-inventor may still enjoy considerable success but this has become an increasingly rare occurrence. The new product development process can be rather quick, the result of a sudden flash of insight. However, the process can take years. Still, in some cases, the development cannot take long so much. The standard new product development process model comprises the following stages: Idea generation, Idea screening, concept development and testing, marketing-strategy development, business analysis, product development, market testing, and commercialization.

METHODS:

New ideas can be generated both directly indirectly. Both approaches can be undertaken simultaneously and can very from highly structured, and loosely structured to unstructured procedures.

Direct methods rely heavily upon the creativity of individuals as well as groups and the consumer survey data for the techniques, e.g., Forced relationships, Transfer Analysis, Brainstorming, Motivation research, Market-gap Analysis, Multi-dimensional scaling, etc.

Indirect methods refer to the 'synthetic' methods that are used for other purposes but, with little ingenuity, they can be employed just as well in exploration.

ECONOMIC ANALYSIS-EVALUATION OF NEW PRODUCT IDEAS/CONCEPTS

Product managers are involved, directly of indirectly in the preparation and presentation of investment proposals for new facilities, new markets, new products, or new projects. What are the financial calculations required to make the case. Economic analysis is sales, cost, and profit projections of a product proposal. It is only after these projections satisfy the company's objectives, that the product concept can move to the product-development stage, as the incentive for new-product development grows. The total economic analysis, of a complete new-product business plan should include estimates from marketing, production, and accounting personnel.

PURPOSE:

The purpose of economic analysis is to provide a structure of analysis that will require all the parties involved to recognize the full realities of the situation. The idea is to give the persons (who will provide the money for the ultimate commercialization process) a full and objective statement of what is supposed to happen financially. Moreover, it is possible that this type of analysis exercise motivates all the parties concerned to be more objective and thorough in their efforts. The major purpose of economic analysis is to serve as a basis for a decision as to whether the corporate resources should be committed to the development of new product. Now the question, "What will be earned from the amount of money spent to develop and market the new product?". We suggest one way of reaching a solution is to evaluate demand and supply.

MARKET POTENTIAL :

The market potential is the starting point of any economic analysis it is not a projection of actual sales. Rather, it is the maximum quantity an entire industry can sell if its marketing effort is the utmost.

MARKET DEMAND:

Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined marketing environment under a defined marketing program.

• If the new product is similar to one already in the market, estimates in the market demand become easy. However, when the new product is very much different from existing ones, projections become subjective and uncertain.
• If an innovative product serves the same uses as conventional products, its demand will be governed by the rate at which it replaces the old.
• In evaluating demand for a brand new product, the penetration patterns of an older product can some time be used.
• Modified, revised, or altered products make the most predictable cases. The old product provides a customer base, a sales history, and a current demand. But product is new to a company are less predictable as they have no past and no recorded body of information. They offer great uncertainties. Market demand depends on what a company does. But, the company's marketing efforts, in turn, is affected by competition, customer preferences, and industrial growth rate. A new brand may have to spend relatively large sums of money to gain customer when brand loyalty runs high, or when the market is dominated by strong, established brands. On the other hand, rupee-per-new-customer expenditure may be relatively low in a market undergoing rapid growth.
• If a new product is introduced for pre-emptive reasons -to prevent a competitor from making inroads- then the economic analysis takes on different dimensions. The new brand is expected to take away a portion of the existing brand's sales. At the same time, some of that could go to the competitors in the new brands. The net company gain, thus, is the difference between ' what would have been the sales without the new brand 'and 'what happen with it '. here, the market demand estimation becomes very complicated , but a complete economic analysis must address itself to such complexions.

ESTIMATING SALES:

A firm needs to estimate the minimum and maximum if sales to determine if the sales will be profitable. In other words, to learn the range of risk. The firm can benefit from examining the sales history of similar products and also by surveying the market opinions. There is a need to set the minimum sales level that will cover the fixed selling expenses.

ESTIMATEING FIRST TIME SALES:

Here we would like to refer Bass concept, he used an epidemic(sometimes called contagion) equation to forecast sales of appliances when they were first introduced. He used sales data for the first few years of product introduction to estimate sales the subsequent years until replacement demand became a factor.

In this model, the probability of purchase at time T is :

P(T) = p + q [Y(T)/m];

Where :

p = probability of first at t =0, or the coefficient of innovation, q = coefficient of imitation,

m = total number of potential adopters, Y(T) = the number of adoption purchases by T, and

Y(T)/m = the fraction of potential adopters who have purchased.

Bass defines an" innovator" as an "early adopters of a new product" and an "imitator" as a "late adopter of a product whose purchase decision is influenced by earlier buyers and users".

The number of adopters at T is:

S(T) = pm + (q-p) Y(T) -(q/m) [Y(T)]²

The maximum number of adoptions will occur at T⁺ :

T⁺ = ( p+q )/m(q/p)

S(T⁺) = m(q+p)² /4q

Fourt & Woodlock developed a first-time sales model that they tested with several new consumer non-durable products. Their observation of new- product-market-penetration rates showed that (l) cumulative sales approached a limiting penetration level of less then 100% of all households, and (2) the successive increment of gain declined. The equation is :-

q_t = rq (1-r)^t-1 where,

q_t = percentage of total households expected to try the product in period t,

r = rate of penetration of untapped potential,

q = percentage of total households expected to eventually try the new product, and t = time period.

That is to say, as the time moves on, the incremental trial purchase percentage moves towards zero. To estimate rupee-sales from new buyers in any period, the estimated trial rate for any period, qt, is the total number households times the expected first-purchase expenditure per household of the product.

ESTIMATING REPLACEMENT SALES :-

The estimate of replacement sales begins with an idea of products, life, or survival age. The first replacement sales can then be guessed more accurately. Bu, when exactly the replacement will take place is a matter of alternatives before the customer and his economic condition, on one hand, and product s price and the company s selling efforts, on the other hand.

Practically, replacement sales are difficult to estimate before the product is actually in use. That is why marketers prefer estimates of first time sales for launching a new product.

ESTIMATING REPEAT SALES:

Both the first-time sales as-well-as repeat sales are to be estimated for a frequently purchased new product. Sales, in the long run, result because of repeat purchases and also after all first-time purchase have taken place. Repeat purchases also show customer satisfaction with the product. Repeat purchase are to be noted in an different classes of repeat buyers: those who buy once, twice, thrice, four times, and so on. The product may be bought only a few times and dropped. Usage rates may differ from buyer to buyer. Initially, the potential market for consumer products like automatic washing machine are ill-defined and the useful life of a purchased product changes over time.

SALES FORECASTING METHODOLOGIES

The output of the most new products forecasting systems is 'sales' or 'share of market'. Structurally, 'causal forces', like product, price, distribution, competition etc. , give, 'forecasting behavior', such as awareness, trial, and repeat purchase. And, then, sales can be forecast from behavior through projections. Sales can also be forecast directly from the causal forces by using judgmental estimates-judgment by executives, sales force, of users.

FORECASTING VIA JUDGMENTAL ESTIMATES:

Since there is a lack of historical data in case of new product, judgment methods predominate, 'Executive judgment' is the most common- 90% of all sales forecasts on new products are principally executive judgments. Executives may use data, mechanical connectors of formulae, parallels, information, opinions, etc., to arrive at their judgments. 'Sales force judgment' is also used-sales people, sales managers, or even dealers can be asked to make forecasts for their respective market areas, and these can be totaled. 'Users' can also be researched to know their intentions for their judgments. This method works better in case of new industrial products.

FORECASTING VIA AWARENESS-TRIAL-REPEAT PURCHASE:-

Repeat buyers = Customers x Awareness %' age x Trial %' age (those who are aware) x repeat purchases %' age (those who tried).

FORECASTING VIA MATHEMATICAL MODELS:-

The few simplistic mathematical models used to forecast new product sales are of almost no help. One method translates 'intent-to-buy' percentages directly into market shares. Another method does the same with 'rank order preference data'. A third method extrapolates from test market sales figures to national sales figures by extending test area 'share of market' percentage.

The more recent developments in the use of mathematical models very greatly and it is difficult to classify them in away that clearly and quickly indicates their difference. It is better to consult with experts in this field if you wish to try any of the models. However, it should be noted here that not all mathematical models are complicated and advanced. Some are simple representations of common issue in model form for ease of calculation and for consistency.

NEW PRODUCT LAUNCH & TEST MARKETING

Coming just before commercialization or launch, test marketing is the final stage of new product development process. This is also the final chance to evaluate the new product and its marketing plan before its full-scale distribution in trade channels.

STRATEGIES:-

Before deciding on nay procedure of test marketing, the issue of 'test markets' , 'duration' and 'information' are to be settled.

Test markets

Selection of test marketers becomes a critical factor, especially when the purpose is to drive a national sales estimate for the new product. Test markets selected must be representative of the universe of the customers envisioned in the marketing plan. They should typify target groups, sales outlets, media patterns, and the competition. No outside influences should be able to affect sales within the test markets. It is assumed that a new product fails in test marketing not because of the improper selection of the test market. It is difficult to find a good representative city or region for test marketing, then the most critical factor to be aware of is by how much does the city or region selected vary from the national format. With the help of this information, behavioral factor specific to each city or region can be developed which can be used for extrapolating national sales.

DURATION

As such, there is no required time period for an appropriate test market. Marketers prefer to shorten the test period minimize competitive reaction, but, for consumer products, time may be required to build retail distribution, to develop consumer interest, and to provide opportunities for repeat purchase.

In case of certain products, such as with high purchase frequencies, early sales may be a poor indicator of eventual performance, for their triers may build up rapidly be first and then decrease exponentially in succeeding times. Hence, such products, with short buying cycles, may often display " humped " sales curves. Therefore, such products should be test marketed for long enough time for the trial rate to level off and for repeat purchase patterns to take effect. That is to say, if the new product is a consumer non-durable, then test marketing should include at least to or three (repeat) purchase periods to study brand loyalty. At the same time, sufficient time should be allowed to take care of the deficiencies discovered in the product or the program before the test marketing is called off.

INFORMATION

"What type of information is to be collected in the test marketing? " is the next major issue in the strategy of test marketing if the test marketing mix has different levels of advertising, then reaction to advertising theme should be elicited from each sample respondent, and their recall should be measured. The new product can be shown to the respondents and their reactions to its concept, design, size, price, etc, can be sought. To check the performance of the test marketing program at retail outlets, number of outlets, their size, shelf space, display, sales volume, stocks, prices, etc, should be noted.

THE MARKETING PLAN FOR A NEW PRODUCT

When the test market results are positive, the new product is already to enter the final batter ground- the market.

Setting objectives for new products: the statement of marketing objectives for new products represents a decision criterion-a goal that team strives to achieve. A statement of clearly defined, measurable, time- bound objectives is critical, specially if the new product team is large and diverse. Marketing objectives clearly written down and communicated can have a syneergising effect on the Activities of the new product team. Typical marketing objectives for the new product should contain:

• Market share by the year.
• Unit or Rupee value sales of the product by the year.
• Product profitability in terms of percentage margins and payback.

Situation Analysis: An analysis of the environment, surrounding the new product is critical to its success and usually is one of the early steps in the development process. It is hear being discussed only as an ingredient of the marketing plan. The situation analysis in this respect would comprise of the macro-environmental analysis, the market analysis and internal analysis.

The Market Analysis :- is essentially undertaken to provide an input in designing a successful, marketing strategy. It includes :

• Market Overview
• Segment Overview
• Consumer Overview
• Competition Overview

Time invested in market analysis usually gives rich dividend at the time of planning the positioning strategies of the new product. In respect of the marketing plan one must specifically analyse:

• Distribution system
• The sales force
• Promotional set-up
• Consumer's approach
• Advertisement message & approach

Prior to plan the internal strategy one must emphasize the concept of reaching to the right people at the right in a right manner. The selection of the test market must be based on the following thoughts:

• Ease of access
• Degree to fit in needs and preferences
• Relative advantages to the competitive edge
• Win-over forthcoming competitive situations
• Profitability
• Sales target

ADVERTISING A NEW PRODUCT

Advertising usually represents the thrust of communication efforts incase of a new product. developing the advertising plan in case of new products must involves the following decisions.

Deciding upon the Advertising Objectives:-the firm should clearly decide the focus of product on

• Promoting trials ?(this could accomplish through FREE sampling)
• Generating an unique image?
• Generating awareness, interest or favorable attitude?
• Promoting repurchase?

Deciding on the Advertising Strategies: -this is somewhat relates to the product positioning , thus the pre -communication research is used to provide inputs to the positioning by segment decision and are designed to establish the communication components of positioning.

Determining the Advertising Budget:- in absence of precise information about market definition, determination of advertising budget is a difficult task. Normally the objective and task method is utilized, in conjunction with estimates of the expected expenditures on the new product.

Media Selection:- Media Selection should enable the enhancement of communication effort through specific media characteristics like media image and editorial content. That must take into consideration the time response function.