Strategic Management: Formulation and Implementation

New Products And Services

A company can add new products in two ways: acquisition and new-product development.

The acquisition route can take three forms:

The new-product route can take two forms: (1) the company can develop new products in its own laboratories; (2) the company can contract with independent researchers or new-product-development agencies to develop specific products for the firm.

"New product" means original products, improved products, modified products and new brands that the firm develops through its own R&D efforts.

The new-product-development process consists of eight stages:

Idea generation
The purpose of idea generation is to create a large number of ideas. New-product ideas can come from many sources: customers, scientists, competitors, company sales people, channel members, and top management. A number of techniques can help individuals and groups generate better ideas. Some of these are: attribute listing, forced relationships, morphological analysis, need/problem identification, brainstorming, synectics.
Idea screening
The purpose of the screening stage is to reduce the number of ideas to an attractive practicable few.
Concept development and testing
Concept development and testing methodology applies to any product, service, or idea, such as an electric car, a new machine tool, a new banking service, or a new health plan. Concept development requires that product idea should be turned into several product concepts. A product concept is an elaborated version of the idea expressed in meaningful consumer terms.

Each concept requires positioning so that its real competition can be understand. The concept has to be positioning against other products and existing brand in the product category. Concept testing calls for testing these concepts with an appropriate group of target consumers.

Marketing-strategy development
The new-product manager will have to develop a preliminary the marketing-strategy statement for introducing this product into market. The marketing-strategy statement consists of three parts:
  1. the first part describes the size, structure, and behavior of target market, the planned product positioning, and the sales, market share, and profit goals sought in the first few years;
  2. the second part of the marketing-strategy statement outlines the product's planned price, distribution strategy, and marketing budget for the first year;
  3. the third part of the marketing-strategy statement describes the planned long-run sales and profits goals and marketing-mix strategy over time.
Business analysis
Management must review the sales, cost, and profit projections to determine whether they satisfy the company's objectives.
Product development
If the product concepts passes the business test, it moves to R&D and/or engineering to be developed into a physical product.
Market testing
The purpose of market testing is to learn how consumers and dealers react to handling, using, and repurchasing the actual product and how large the market is. In testing consumer products, the company aims to estimate four variables trial, first repeat, and purchase frequency. The major methods of consumer- goods testing are: sales-wave research, simulated store technique, controlled test marketing, test markets, industrial-good market testing.
Commercialization
In commercializing a new product, market entry timing can be critical. The company must also decide whether to launch the new product is a single locality, a region, several regions, the national market, or the international market. The company must target its distribution and promotion to the best prospects groups. Finally, the company must develop an action plan for introducing the new product into the rollout markets.

The purpose of each stage is to decide whether the idea should be further developed or dropped.