Introducti
Introducti
on
Product Development strategy
Product Development strategy
Giv
Given en the the raprapid id chachangenges s in in conconsumsumer er tastastes tes tectechnohnologlogy y ariarid d comcompetpetitiitionon com
companpanies ies musmust t devdeveloelop p a a stesteady streaady stream m of of new produnew products cts and serviand services ces AA fir
firm m can can obtobtainain-ne-new w proproducducts ts m m two two wayways. s. One One is is ththrourough gh acqacquisuisitiition on byby bu
buyinying g a a whowhole le comcompanpany y a a patpatent or ent or a a liclicensense e to to prproduoduce ce somsomeoneone e elselse e ss prod
product The uct The other as other as throthrough new-prough new-product develoduct developmenpment t m m the company sthe company s ow
own n rereseseararch ch -a-andnd-d-devevelelopopmement nt dedepapartrtmement nt By By nenew w prprododucucts ts we we memeanan ori
originginal al prproduoducts cts proproducduct t imimproprovemvementents s proproducduct t modmodifiificatcationions s and and newnew bran
brands ds that that the the firm develops firm develops throthrough ugh its its own own researesearch-arch-and-dnd-develoevelopmentpment efforts.
efforts.
When an organization introduces a product into a market they must ask When an organization introduces a product into a market they must ask themselves a number of
themselves a number of questions.questions. 1.
1. Who Who is this the pre produoduct act aimeimed atd at??
2.
2. What benefit will they expect?What benefit will they expect?
3.
3. How do they plan to position the product within the market?How do they plan to position the product within the market? 4.
4. What differential advantage will the product offer over their What differential advantage will the product offer over their competitors?
competitors?
New products continue to fail at a disturbing rate. One source estimates that New products continue to fail at a disturbing rate. One source estimates that
mor
more e thathan n 90 90 perpercencent t of of all new all new prproduoducts fail cts fail in in witwithin 2 hin 2 yeayears rs AnoAnothether- r-study suggested that of the staggering 25,000 new consumer food, beverage, study suggested that of the staggering 25,000 new consumer food, beverage, beauty, and healthcare products to hit the market each year, only 40 percent beauty, and healthcare products to hit the market each year, only 40 percent
wi
will ll be be ararouound nd 5 5 yeyearars s lalateter r MoMorereovover er fafaililurure e raratetes s fofor r nenew w ininduduststririalal p
prroodduucctts s mmaay y bbe e aas s hhiiggh h aas s 330 0 ppeerrcceenntt.. Why do so many new products fail? There re several reasons Although an Why do so many new products fail? There re several reasons Although an idea may be good the market size may have been overestimated Perhaps the idea may be good the market size may have been overestimated Perhaps the actual product was not designed as well as it should have beer Or maybe it actual product was not designed as well as it should have beer Or maybe it was incorrectly positioned in the market priced too high or
was incorrectly positioned in the market priced too high or advertised poorlyadvertised poorly A
research findings- Sometimes the costs of product development are higher research findings- Sometimes the costs of product development are higher than expected, and sometimes Competitors fight back harder than Expected. than expected, and sometimes Competitors fight back harder than Expected. However the reasons behind some new product failures seem pretty obvious However the reasons behind some new product failures seem pretty obvious Try the following on for size.
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Literature
Literature
Product strategies
Product strategies
When an organization introduces a product into a market they must ask When an organization introduces a product into a market they must ask themselves a number of
themselves a number of questions.questions.
•
• Who is the product aimed at?Who is the product aimed at?
•
• What benefit will they expect?What benefit will they expect? •
• How do they plan to position the product within the market?How do they plan to position the product within the market? •
• What differential advantage will the product offer over their What differential advantage will the product offer over their
competitors? competitors?
We must remember that Marketing is
We must remember that Marketing is fundamentally about providing thefundamentally about providing the correct bundle of benefits to the end user, hence the saying ‘Marketing is not correct bundle of benefits to the end user, hence the saying ‘Marketing is not about providing products or services it
about providing products or services it is essentially about providingis essentially about providing changing benefits to the changing needs and demands of the customer’ changing benefits to the changing needs and demands of the customer’ (P.Tailor 7/00)
(P.Tailor 7/00)
Philip Kotler in Principles of Marketing devised
Philip Kotler in Principles of Marketing devised a very interesting concepta very interesting concept of benefit building with a
of benefit building with a productproduct For a analysis the boo
Kotler suggested that a product should be viewed in three levels. Kotler suggested that a product should be viewed in three levels. Level 1: Core Product. What is the core benefit your product offers?. Level 1: Core Product. What is the core benefit your product offers?.
Customers who purchase a camera are buying more then just a camera they Customers who purchase a camera are buying more then just a camera they are purchasing memories.
are purchasing memories.
Level 2Actual Product: All cameras capture memories. The aim is to ensure Level 2Actual Product: All cameras capture memories. The aim is to ensure that your potential customers purchase your one. The strategy at this level that your potential customers purchase your one. The strategy at this level involves organizations branding, adding features and benefits to ensure involves organizations branding, adding features and benefits to ensure thatthat their product offers a differential advantage from their competitors.
their product offers a differential advantage from their competitors.
Level 3: Augmented product: What additional non-tangible benefits can Level 3: Augmented product: What additional non-tangible benefits can youyou offer? Competition at this level is based around after sales service,
offer? Competition at this level is based around after sales service,
warranties, delivery and so on. John Lewis a retail departmental store offers warranties, delivery and so on. John Lewis a retail departmental store offers free five year guarantee on purchases of their Television sets, this gives their free five year guarantee on purchases of their Television sets, this gives their `customers the additional benefit of peace of mind over the five years should `customers the additional benefit of peace of mind over the five years should their purchase develop a fault.
their purchase develop a fault.
Idea
Idea genegenerat rat ionion
New product development starts with idea generation the systematic search New product development starts with idea generation the systematic search for new product ideas. A company typically has to generate many in order to for new product ideas. A company typically has to generate many in order to
fi
find nd a a fefew w gogood od ononcece. . AcAccocordrdining g to to onone e wewellll-k-knonown wn mamananagegemementnt consultant,
consultant, For every 1 000 For every 1 000 ideas, only 100 wilideas, only 100 will have enough comml have enough commercial t0ercial t0 promise to merits a small sca1e experiment only 10 of those will Warrant promise to merits a small sca1e experiment only 10 of those will Warrant substantial financial commitment and of those a couple will turn out to be substantial financial commitment and of those a couple will turn out to be unqualified successes. “His conclusion?“ If you want to find a few ideas unqualified successes. “His conclusion?“ If you want to find a few ideas with the power to enthrall customer, foil competition, and thrill investors’ with the power to enthrall customer, foil competition, and thrill investors’ yo
you u mmusustt’ ’ fifirrst st gegennereraate te hhununddreredds s anand d popotetenntitialally ly ththooususaandnds s of of unconventional strategic ideas.
unconventional strategic ideas.
Internal Idea Sources Internal Idea Sources
Us
Usining g ininteternrnal al sosoururceces s ththe e cocompmpanany y cacan n fifind nd nenew w idideaeas s ththrorougugh h foformrmalal research and development. It can pick the brains of its executives Scientists research and development. It can pick the brains of its executives Scientists eng
engineineers ers manmanufaufactucturinring g stastaff ff SanSand d salsales es peopeople ple SomSome e comcompanpanies ies havhave- e-developed successful entrepreneurial programs that encourage employees to developed successful entrepreneurial programs that encourage employees to think up and develop new product ideas. For example 3M s well known think up and develop new product ideas. For example 3M s well known 15- percent rule allow employees to spend 15 percent of their tine bootlegging percent rule allow employees to spend 15 percent of their tine bootlegging —w
—workorking ing on on proprojecjects ts of of pepersorsonal nal intintereerest st whewhethether r or or not not thothose se proprojecjectt d
diirreeccttlly y bbeenneeffiit t tthhe e ccoommppaannyy.. Co
Compmpananieies s sosome me titimemes s lolook ok fofor r crcreaeatitive ve ininnonovavatition on apappproroacachehes s ththatat overcome barriers to the free flow-of new product ideas For example firms overcome barriers to the free flow-of new product ideas For example firms like Eureka’ Ranch—a well known new product hatchery —employ both like Eureka’ Ranch—a well known new product hatchery —employ both method and madness in helping companies to jumpstart their new product method and madness in helping companies to jumpstart their new product idea generation process.
idea generation process.
External Idea Sources External Idea Sources
Good new product idea also come from watching and listening to customers Good new product idea also come from watching and listening to customers The company can
The company can analyanalyze ze custcustomer questioomer questions ns and complaiand complaints to nts to find newfind new p
proroduductcts s ththat at bebetttter er sosolvlve e coconsnsumumes es prproboblelems ms CoCompmpanany y enengigineneerers s or or salespeople can meet with and work.
salespeople can meet with and work. Alongside customers to get Alongside customers to get suggestionssuggestions and ideas The Company can conduct surveys or focus groups to learn about and ideas The Company can conduct surveys or focus groups to learn about Co
Consnsumumer er neneededs s anand d wawantnts. s. HeHeininz z didid d jujust st ththat at whwhen en itits s rereseseararchchererss approached children who consume more than half of the ketchup sold find approached children who consume more than half of the ketchup sold find out what would make ketchup more appealing to them The answer change out what would make ketchup more appealing to them The answer change the color So, Heinz developed and launc1iedEZ Squirt green ketchup that the color So, Heinz developed and launc1iedEZ Squirt green ketchup that comes iii a squeezable bottle targeted at kids Blastin Green ketchup was a comes iii a squeezable bottle targeted at kids Blastin Green ketchup was a smash hit, so Heinz followed up with an entire rainbow of EZ Squirt colors, smash hit, so Heinz followed up with an entire rainbow of EZ Squirt colors, including Funky Purple Passion Pink, Awesome Orange, Totally Teal, and including Funky Purple Passion Pink, Awesome Orange, Totally Teal, and Stellar Blue. The EZ Squirt bottle s special nozzle also emits a thin ketchup Stellar Blue. The EZ Squirt bottle s special nozzle also emits a thin ketchup
stream, “so tykes can autograph their burgers (or squirt someone across the stream, “so tykes can autograph their burgers (or squirt someone across the table though Heinz neglects to mention that).” In all the new line earned the table though Heinz neglects to mention that).” In all the new line earned the Company a 5 percent increase in sales ii the first year after hitting the Company a 5 percent increase in sales ii the first year after hitting the g
grroocceerry y sshheellff..
Consumers often create new products and uses on their own and companies Consumers often create new products and uses on their own and companies can benefit by putting them on the market. For example for years customers can benefit by putting them on the market. For example for years customers were spreading the word that Skin-so-soft bath oil and moisturizer was also were spreading the word that Skin-so-soft bath oil and moisturizer was also a terrific bug repellent. Whereas some Consumers Were content simply to a terrific bug repellent. Whereas some Consumers Were content simply to b
batathe he an an wawateter r scscenenteted d wiwith th ththe e frfragagrarant nt oioil l otothehers rs cacarrrrieied d it it in in ththeieir r backpacks to mosquito-infested campsites or kept a bottle on the deck of backpacks to mosquito-infested campsites or kept a bottle on the deck of their beach houses Avon tuned the idea into a complete line of Skin-So-Soft their beach houses Avon tuned the idea into a complete line of Skin-So-Soft Bug Guard PLUS lR335® products including the Insect Repellent Gentle Bug Guard PLUS lR335® products including the Insect Repellent Gentle Breeze Moistures Sun block Lotion
Breeze Moistures Sun block Lotion SPF 30 a combination moisturizer insectSPF 30 a combination moisturizer insect repellent and sunscreen.
repellent and sunscreen. Th
The e seseararch ch fofor r nenew-w-prprododucuct t idideaeas s shshouould ld be be sysyststemematatic ic rarathther er ththanan haphazard. Otherwise few new ideas will surface and many good ideas will haphazard. Otherwise few new ideas will surface and many good ideas will sputt
sputter and er and die Top die Top manamanagemegement nt can avoid these can avoid these probproblems by lems by instainstalling anlling an idea management system that directs the flow of new ideas to a central point idea management system that directs the flow of new ideas to a central point where they can be collected reviewed and evaluated hi setting up such a where they can be collected reviewed and evaluated hi setting up such a system the company can do any or all
system the company can do any or all of the following.of the following.
• •
Appoint a respected senior person to be the company s idea manager. Appoint a respected senior person to be the company s idea manager.
• •
Create a cross-functional idea management committee consisting of Create a cross-functional idea management committee consisting of peop
people le from R&D, from R&D, enginengineerieering ng purcpurchasinhasing g operaoperationtions s finafinance nce andand sales and marketing to meet regri1rly and evaluate proposed new sales and marketing to meet regri1rly and evaluate proposed new product and service ideas.
product and service ideas.
• •
Set up a toll-free number or Web site for anyone who wants to send a Set up a toll-free number or Web site for anyone who wants to send a new idea to the idea manager.
new idea to the idea manager.
• •
En
Enccouourragage e alall l cocommpapany ny ststakakehehololdderers-s-ememplplooyeyeees s susupppplilierers,s, distributors, dealers—to send their ideas to the
• •
Set up formal recognition programs to reward those who contribute Set up formal recognition programs to reward those who contribute the best new ideas.
the best new ideas.
Idea Screening Idea Screening
The purpose of idea generation is to create a large number of ideas. The The purpose of idea generation is to create a large number of ideas. The purp
purpose of ose of the succeedithe succeeding stages is ng stages is to reduce that number. The to reduce that number. The firsfirst t idea idea--reducing stage is idea screening, which helps spot good ideas and drop poor reducing stage is idea screening, which helps spot good ideas and drop poor ones as soon as possible. Product development costs rise greatly in later ones as soon as possible. Product development costs rise greatly in later Stages, so the company wants to go ahead only with the product ideas that Stages, so the company wants to go ahead only with the product ideas that will turn into profitable products.
will turn into profitable products.
o
o The object is to eliminate unsound concepts prior to devotingThe object is to eliminate unsound concepts prior to devoting
resources to them. resources to them.
o
o The screeners must ask at least The screeners must ask at least three questions:three questions:
Will the customer in theWill the customer in the target markettarget market benefit from thebenefit from the
product? product?
WhWhat at is is ththe e sisize ze anand d grgrowowth th foforerecacaststs s of of ththe e mamarkrketet
segment/target market? segment/target market?
What is the current or expected competitive pressure for What is the current or expected competitive pressure for
the product idea? the product idea?
What are the industry sales and market trends the productWhat are the industry sales and market trends the product
idea is based on? idea is based on?
Is it technically feasible Is it technically feasible to manufacture the product?to manufacture the product?
Will the product be profitable when manufactured andWill the product be profitable when manufactured and
delivered to the customer at the target price? delivered to the customer at the target price?
Many companies require their executives to write
Many companies require their executives to write up new-product ideas on aup new-product ideas on a standard form that can be reviewed by a new-product committee. The standard form that can be reviewed by a new-product committee. The write-up describes the product, the target market, and the competition. It makes up describes the product, the target market, and the competition. It makes some rough estimates of market size, product price, development time and some rough estimates of market size, product price, development time and costs, manufacturing costs, and rate of return. The committee then evaluates costs, manufacturing costs, and rate of return. The committee then evaluates the idea against a set of general criteria. For example, at Kao Company, the the idea against a set of general criteria. For example, at Kao Company, the
- large Japanese consumer-products company, the committee asks questions - large Japanese consumer-products company, the committee asks questions such as these: Is the product truly useful to consumer and society? Is it good such as these: Is the product truly useful to consumer and society? Is it good ffoor r oouur r paarrttiiccup ullaar r ccoommppaannyy??
Does it mesh well with the company’s objectives and strategies? Do we have Does it mesh well with the company’s objectives and strategies? Do we have the people, skills, and resources to make it succeed? Does it deliver more the people, skills, and resources to make it succeed? Does it deliver more value to customers than do competing products? Is it easy to advertise and value to customers than do competing products? Is it easy to advertise and dis
distritributbute? e? ManMany y comcompanpanies ies havhave e welwell-dl-desiesignegned d syssystemtems s fofor r ratrating ing andand screening new-product ideas.
screening new-product ideas.
Concept development and testing Concept development and testing
An attractive idea must be developed into a product concept. It is important An attractive idea must be developed into a product concept. It is important to distinguish between a product idea, a product concept, and a product to distinguish between a product idea, a product concept, and a product image. A product idea is
image. A product idea is an idea for a an idea for a possible product that the company canpossible product that the company can see itself offering to the market. A product concept is a detailed version of see itself offering to the market. A product concept is a detailed version of the idea stated in meaningful consumer terms. A product image is the way the idea stated in meaningful consumer terms. A product image is the way consumers perceive an actual or
consumers perceive an actual or potential product.potential product.
o
o Develop the marketing and engineering detailsDevelop the marketing and engineering details
Who is the target market and who is the decision maker Who is the target market and who is the decision maker
in the purchasing process? in the purchasing process?
What product features must the What product features must the product incorporate?product incorporate?
What benefits will the What benefits will the product provide?product provide?
How will consumers react to the product?How will consumers react to the product?
How will the product be How will the product be produced most cost effectively?produced most cost effectively?
PrProvove e fefeasasibibililitity y ththrorougugh h vivirtrtuaual l cocompmpututer er aiaidededd
rendering, and rapid
rendering, and rapid prototypingprototyping
What will it cost to produce it?What will it cost to produce it?
Concept Development Concept Development
Af
Afteter r 10 10 yeyearars s of of dedevevelolopmpmenent, t, DaDaimimlelerCrChrhrysysleler r is is gegettttining g rereadady y toto comme
commercialrcialize ize its its expeexperimenrimental tal fuelfuel-cell-cell-pow-powered ered electelectric ric car. car. This This car’car’ss nonpo
nonpollutilluting ng fuel-fuel-cell cell systesystem m runs directly runs directly on on methmethanol, which anol, which delideliversvers hydrogen to the fuel cell with only water as a by-product. It is highly fuel hydrogen to the fuel cell with only water as a by-product. It is highly fuel efficient (75 percent more efficient than gasoline engines) and
efficient (75 percent more efficient than gasoline engines) and gives the newgives the new car an environmental advantage over standard internal combustion engine car an environmental advantage over standard internal combustion engine ca
cars rs or or eveven en totodaday’y’s s ststupupefefacacieient nt gagasosolilinene-e-elelectctriric c hyhybrbrid id cacarsrs.. Las
Germany, and the United states to test their worth in everyday operation. Germany, and the United states to test their worth in everyday operation. Based on the tiny Mercedes A-Class, the car accelerates quickly, reaches Based on the tiny Mercedes A-Class, the car accelerates quickly, reaches speeds of 90 miles per hour, and has a 280-mile driving range, giving it a speeds of 90 miles per hour, and has a 280-mile driving range, giving it a huge edge over battery-powered electric cars that travel only about 80 miles huge edge over battery-powered electric cars that travel only about 80 miles before needing 3 to 12 hours off recharging. Fuel cell systems are also being before needing 3 to 12 hours off recharging. Fuel cell systems are also being
tteesstteed d iin n bbuusssseess, , ttrruucckkss, , aannd d ootthheer r vveehhiicclleess..
Now DimlerChrysler’s task is to develop this new product into alternative Now DimlerChrysler’s task is to develop this new product into alternative product concepts, find out how, attractive each concept is to customers, and product concepts, find out how, attractive each concept is to customers, and choose the best one. It might create the following product concepts for the choose the best one. It might create the following product concepts for the ffuueell--cceelll l eelleeccttrriic c ccaarr::
Concept 1 A moderately priced subcompact designed as a second family car Concept 1 A moderately priced subcompact designed as a second family car to be used around town. The car is ideal for running errands and visiting to be used around town. The car is ideal for running errands and visiting friends.
friends. Conce
Concept pt 2 2 A A mediumedium-cosm-cost t sportsporty y compcompact appealing to act appealing to younyoung g peoplpeople.e. C
Coonncceeppt t 3 3 A A iinneexxppeennssiivve e ssuubbccoommppaacct t ““ggrreeeenn” ” ccaar r aappppeeaalliinng g ttoo environmentally conscious people who want practical transportation and low environmentally conscious people who want practical transportation and low pollution.
pollution. Conce
Concept 4 pt 4 A high-eA high-end SUV append SUV appealing to thaling to those who lovose who love the space SUVse the space SUVs provide but lament the poor gas mileage.
provide but lament the poor gas mileage.
Concept Testing Concept Testing
Concept testing calls for testing new-product concepts with groups of target Concept testing calls for testing new-product concepts with groups of target consumers. The concepts may be presented to consumers symbolically or consumers. The concepts may be presented to consumers symbolically or
p
phhyyssiiccaallllyy. . HHeerree; ; iin n wwoorrddss, , iiss
concept 3: An efficient fun-to drive fuel cell-powered electric subcompact concept 3: An efficient fun-to drive fuel cell-powered electric subcompact ccaar r tthhaat t sseeaatts s ffoouurr.. This methanol powered high-tech wonder provides practical and reliable This methanol powered high-tech wonder provides practical and reliable trans potation with virtually o pollution It goes up to 90 miles per hour and trans potation with virtually o pollution It goes up to 90 miles per hour and unlike battery-powered electric cars, it never needs recharging It s priced, unlike battery-powered electric cars, it never needs recharging It s priced, ffuulllly y eeqquuiippppeed d aat t $$2200000000..
For some concept tests a word or picture description might be sufficient. For some concept tests a word or picture description might be sufficient. However a more concrete and physical presentation of the concept will However a more concrete and physical presentation of the concept will increase the reliability of the concept test Today some marketers are finding increase the reliability of the concept test Today some marketers are finding innovative ways to make product concepts more real to consumer subjects innovative ways to make product concepts more real to consumer subjects For example some are using virtual reality to test product concepts. Virtual For example some are using virtual reality to test product concepts. Virtual reality programs use computers and sensory devices (such as gloves or reality programs use computers and sensory devices (such as gloves or goggles) to simulate reality A designer of kitchen cabinets might use a goggles) to simulate reality A designer of kitchen cabinets might use a virtual reality program to help a customer ‘ see how his or her kitschier virtual reality program to help a customer ‘ see how his or her kitschier would look and work if
exposed to the concept consumers then may be asked to react to at by exposed to the concept consumers then may be asked to react to at by answering questions such as those. The answers will help the company answering questions such as those. The answers will help the company decide which concept has the strongest appeal For example the last question decide which concept has the strongest appeal For example the last question as
asks ks ababouout t ththe e coconsnsumumerers s inintetentntioion n to to bubuy y SuSupppposose e 10 10 pepercrcenent t of of ththee co
consnsumumerers s sasaid id ththey ey dedefifininitetely ly wowoululd d bubuy y anand d ananototheher r 5 5 pepercrcenent t sasaidid “obab1y ‘The company could project these figures to the full population in “obab1y ‘The company could project these figures to the full population in this target group to estimate sales volume Even then the estimate is
this target group to estimate sales volume Even then the estimate is uncertainuncertain because people do not always carry out their stated intentions.
because people do not always carry out their stated intentions.
Marketing Strategy development
Marketing Strategy development
Sup
Suppospose e DaiDaimlemlerChrChrysrysler ler finfinds ds thathat t conconcepcept t 3 3 fofor r the the fuefuel l celcell l powpowereeredd electric car tests is best The next step is marketing strategy development electric car tests is best The next step is marketing strategy development designing an initial marketing strategy for
designing an initial marketing strategy for introducing this car to the introducing this car to the market.market. Th
The e mamarkrketetining g ststraratetegy gy ststatatememenent t coconsnsisists ts of of ththreree e papartrts. s. ThThe e fifirsrst t papartrt descr
describes the ibes the tar get tar get markemarket t the planned product positithe planned product positioningoning; ; and the and the satessates,, m
maarrkkeet t sshhaarree, , aannd d pprrooffiit t ggooaalls s ffoor r tthhe e ffiirrsst t ffeew w yyeeaarrss. . TThhuuss:: Th
The e tatargrget et mamarkrket et is is yoyounungeger r wewell ll ededucucatated ed momodederarate te to to hihigh gh inincocomeme ind
indiviividuaduals ls coucoupleples s or or smasmall ll famfamiliilies es seeseekinking g prapractictical cal envenviroironmenmentantallylly responsible transportation The car will be positioned as more economical to responsible transportation The car will be positioned as more economical to op
opereratate, e, momore re fufun n tto o drdrivive, e, anand d leless ss popollllututining g ththan an totodaday y s s ininteternrnalal combustion engine or hybrid cars It is also less restricting than battery combustion engine or hybrid cars It is also less restricting than battery powered electric cars which must be recharged regularly. The company will powered electric cars which must be recharged regularly. The company will
aim to sell 100
aim to sell 100 000 car000 cars s in the firsin the first t yeayear r at a at a losloss s of not more than $15of not more than $15 million In the second year the company wall aim for sales of 120,000 cars million In the second year the company wall aim for sales of 120,000 cars and a profit of $25 million.
and a profit of $25 million.
The second part of the marking strategy statement outlines the product s The second part of the marking strategy statement outlines the product s p
plalannnned ed prpricice e didiststriribubutition on anand d mamarkrketetining g bubudgdget et fofor r ththe e fifirsrst t yeyearar:: The fuel cell powered electric car will be offered an three colors—red white The fuel cell powered electric car will be offered an three colors—red white and blue—and will have optional air-conditioning and power drive features and blue—and will have optional air-conditioning and power drive features It will
It will sell at a sell at a retairetail price of l price of $20,0$20,000—w00—with 15 ith 15 percpercent off the ent off the list price tolist price to dealers. Dealers who sell more than 10 cars per month will get an additional dealers. Dealers who sell more than 10 cars per month will get an additional discount of5 percent on each car sold that month An advertising budget discount of5 percent on each car sold that month An advertising budget of$5Q million will be split 50-50 between a national media campaign and of$5Q million will be split 50-50 between a national media campaign and local advertising. Advertising will emphasize the car’s fun spirit and low local advertising. Advertising will emphasize the car’s fun spirit and low eemmiissssiioonnss. . DDuurriinng g tthhe e ffiirrsst t yyeeaarr, , $$110000,,00000 0 wwiilll l bbe e ssppeennt t oonn marketing research to find out who is buying the car and their satisfaction marketing research to find out who is buying the car and their satisfaction levels.
Business analysis Business analysis
On
Once ce mamananagegemement nt hahas s dedecicideded d on on itits s prprododucuct t coconcncepept t anand d mamarkrketetiningg strategy it can evaluate the business- attractiveness of the proposal. Business strategy it can evaluate the business- attractiveness of the proposal. Business analysis involves a review of the sales costs, and profit projections for anew analysis involves a review of the sales costs, and profit projections for anew product to find out whether they satisfy the company’s objectives. If they do product to find out whether they satisfy the company’s objectives. If they do the-product can move to-the product development stage. To estimate sales, the-product can move to-the product development stage. To estimate sales, the company might look at the sales history of similar products and conduct the company might look at the sales history of similar products and conduct surveys of market opinion. It can then estimate minimum and maximum surveys of market opinion. It can then estimate minimum and maximum sa
saleles s to to asassesess ss ththe e rarangnge e of of ririsksk. . AfAfteter r pprerepapariring ng ththe e sasaleles s foforerecacastst,, management can estimate the expected costs and profits for the product management can estimate the expected costs and profits for the product inc
includluding ing marmarketketing ing R&D R&D opeoperatrationions s accaccounountinting g and and finfinancance e coscosts. ts. TheThe company then uses the sales and costs figures to analyze the new product’s company then uses the sales and costs figures to analyze the new product’s financial attractiveness.
financial attractiveness.
o
o EsEstitimamate te lilikekely ly sesellllining g prpricice e babasesed d upupon on cocompmpetetititioion n anandd
customer feedback customer feedback
o
o Estimate sales volume based upon size of market and such Estimate sales volume based upon size of market and such toolstools
as the
as the Fourt-WoodloFourt-Woodlock ck equationequation
o
o Estimate profitability and breakeven pointEstimate profitability and breakeven point
Product development Product development
So far for many new product concepts the product may have existed only as So far for many new product concepts the product may have existed only as a word a thawing or perhaps a crude mock-up If the product concept passes a word a thawing or perhaps a crude mock-up If the product concept passes tthhe e bbuussiinneesss s tteesst t iit t mmoovvees s iinntto o pprroodduucct t ddeevveellooppmmeennt t HHeerre e RR&&D D oor r eng
engineineeriering ng devdeveloelops ps the the prproduoduct ct conconcepcept t intinto o a a phyphysicsical al prproduoduct. ct. TheThe product development step however now calls for a large jump in investment product development step however now calls for a large jump in investment
It
It wwilill l shshow ow whwhetethher er tthe he pprorodducuct t idideea a cacan n be be tuturnrned ed iintnto o a a wowork rk ab
able le prprododucuct. t. ThThe e R&R&D D dedepapartrtmement nt wiwill ll dedevevelolop p anand d tetest st onone e or or momorere physical versions of the product concept R&D hopes to design a prototype physical versions of the product concept R&D hopes to design a prototype that will satisfy and excite consumers and that can be produced quickly aid that will satisfy and excite consumers and that can be produced quickly aid at
at bubudgdgeteted ed cocoststs. s. DeDevevelolopiping ng a a susuccccesessfsful ul prprototototypype e cacan n tatake ke dadaysys,, weeks, months, or even years. Often products under go rigorous tests to weeks, months, or even years. Often products under go rigorous tests to m
maakke e ssuurre e tthhaat t tthheey y ppeerrffoorrm m ssaaffeelly y aannd d eeffffeeccttiivveellyy,, or that consumers will find value in them. Here are some examples of such or that consumers will find value in them. Here are some examples of such product tests:
Procter & Gamb1e (P&G)spends $150 million on 4,000 to 5 0O studies a Procter & Gamb1e (P&G)spends $150 million on 4,000 to 5 0O studies a year test in everything from the ergonomics of picking up a shampoo bottle year test in everything from the ergonomics of picking up a shampoo bottle to how long women can keep their hands in sudsy water. On any given day to how long women can keep their hands in sudsy water. On any given day subjects meet an focus groups e11 their dirty laundry to researchers put subjects meet an focus groups e11 their dirty laundry to researchers put prototype diapers on their babies bottoms and rub mysterious creams on prototype diapers on their babies bottoms and rub mysterious creams on
th
theieir r fafaceces s LaLast st yeyear ar onone e elelememenentatary ry scschohool ol raraisised ed $1$1707000 00 by by hahavivingng st
stududenents ts anand d paparerentnts s tatake ke papart rt in in P&P&G G prprododucuct t teteststs s StStududenents ts teteststeded too
toothpthpastaste e and and shashampompoo o and and ate ate brobrowniwnies es whiwhile le thetheir ir motmotherhers s watwatchechedd advertising for Tempo tissue P&G s paper wipes packaged to fit in a car. advertising for Tempo tissue P&G s paper wipes packaged to fit in a car. At Gillette almost everyone gets involved in new product testing. Every At Gillette almost everyone gets involved in new product testing. Every working day at Gillette, 200 volunteers from various departments come to working day at Gillette, 200 volunteers from various departments come to work unshaven troop to the second floor of the company’s gritty South work unshaven troop to the second floor of the company’s gritty South Boston plant and enter small booths with a sink and mirror. There they take Boston plant and enter small booths with a sink and mirror. There they take instructions from technicians on the other side of a small window as to instructions from technicians on the other side of a small window as to which razor, shaving cream or after shave to use The volunteers evaluate which razor, shaving cream or after shave to use The volunteers evaluate razors for sharpness of blade, smoothness of glide and ease of handling In a razors for sharpness of blade, smoothness of glide and ease of handling In a ne
neararby by shshowower er roroom om wowomemen n peperfrfoorm rm ththe e sasame me riritutual al on on ththeieir r lelegsgs,, underarms and what the company delicately refers to as the bikini area. We underarms and what the company delicately refers to as the bikini area. We
b
blleeeed d sso o yyoouu. . 111 1 ggeet t a a ggooood d sshhaavve e aat t hhoomme e ssaayys s oonne e GGiilllleettttee employee.
employee.
Test marketing Test marketing
If the product passes functional and consumer tests, the next step is test If the product passes functional and consumer tests, the next step is test ma
markrketetining g ththe e ststagage e at at whwhicich h ththe e prprododucuct t anand d mamarkrketetining g prprogograram m araree introduced into more realistic market settings. Test marketing ’gives the introduced into more realistic market settings. Test marketing ’gives the marketer experience with marketing the product before going to the great marketer experience with marketing the product before going to the great expense of full ‘introduction. It lets the company test the product and its expense of full ‘introduction. It lets the company test the product and its ent
entire ire marmarketketing ing prprogrogram-am-pospositiitionioning ng strstrateategy gy advadvertertisiising ng disdistritributbutionion pr
priciicing ng brabrandinding ng and and pacpackagkaging ing and and budbudget get levlevelsels. . The The amoamount unt of of testestt marketing needed varies with each new product Test marketing costs can be marketing needed varies with each new product Test marketing costs can be high, and it takes time that may allow competitors to gain advantages.
high, and it takes time that may allow competitors to gain advantages.
o
o Produce a physical prototype or mock-upProduce a physical prototype or mock-up o
o Test the product (and itsTest the product (and its packagingpackaging) in typical usage situations) in typical usage situations o
o Conduct focus group customer interviews or introduce at tradeConduct focus group customer interviews or introduce at trade
show show
o
o Make adjustments where necessaryMake adjustments where necessary o
o Produce an initial run of the product and sell it in a test marketProduce an initial run of the product and sell it in a test market
area to determine customer acceptance area to determine customer acceptance
When the costs of developing and introducing the product are low or when When the costs of developing and introducing the product are low or when management as already confident about the new product the company may management as already confident about the new product the company may do little or no test marketing In fact test marketing by consumer do little or no test marketing In fact test marketing by consumer package-goods firms has b
goods firms has been declining in reeen declining in recent years Companiecent years Companies often do not s often do not testtest market simple line extensions or copies of successful competitor products market simple line extensions or copies of successful competitor products For example. P&G introduced its Folgers’s decaffeinated coffee crystals For example. P&G introduced its Folgers’s decaffeinated coffee crystals without test marketing and Pillsbury rolled out Chewy granola bars and without test marketing and Pillsbury rolled out Chewy granola bars and chocolate covered Granola Dips with no standard test market. However chocolate covered Granola Dips with no standard test market. However wh
when en inintrtrododucucining g a a nenew w prprododucuct t rereququirires es a a bibig g ininveveststmement nt or or whwhenen management is not sure of the product or marketing program a company management is not sure of the product or marketing program a company may do a lot
may do a lot of test marketing. For instance Lever USA spent 2 of test marketing. For instance Lever USA spent 2 years testingyears testing its highly successfu
its highly successful l Lever 2000 bar Lever 2000 bar soap in soap in AtlaAtlanta before introdunta before introducing itcing it internationally. Frito-Lay did 18 months of testing in three markets on at internationally. Frito-Lay did 18 months of testing in three markets on at least five formulations before introducing its Baked Lays line of low fat least five formulations before introducing its Baked Lays line of low fat snacks. And Nokia test-marketed its N-Gage cell phone/mobile game player snacks. And Nokia test-marketed its N-Gage cell phone/mobile game player extensively in London before introducing it worldwide.
extensively in London before introducing it worldwide.
Standard test Marketing Standard test Marketing
Us
Usining g ststanandadard rd tetest st mamarkrketets, s, ththe e cocompmpanany y fifindnds s a a smsmalall l nunumbmber er of of representative test cities conducts a full marketing campaign in these cities representative test cities conducts a full marketing campaign in these cities and uses store audits consumer and distributor surveys, and other measures and uses store audits consumer and distributor surveys, and other measures to gauge product performance. The results are used to forecast national sales to gauge product performance. The results are used to forecast national sales and profits discover potential product problems and fine tune the marketing and profits discover potential product problems and fine tune the marketing program.
program.
Standard test markets have some drawbacks. They can be very costly and Standard test markets have some drawbacks. They can be very costly and th
they ey mamay y tatake ke a a lolong ng titimeme—s—somome e lalast st as as lolong ng as as 3 3 to to 5 5 yeyearars s MoMorereovover er competitors can monitor test market results or even interfere with them by competitors can monitor test market results or even interfere with them by cutting their prices in test cities increasing their pro motion or even buying cutting their prices in test cities increasing their pro motion or even buying up the product being tested. Finally test market give competitors a look at up the product being tested. Finally test market give competitors a look at the
the comcompanpany’s y’s new new proproducduct t welwell l befbefore ore it it is is intintrodroduceuced d natnationionallally y ThuThuss competitors may have tune to develop defensive strategies and may even competitors may have tune to develop defensive strategies and may even beat the company s product to the market For example while CLOROX® beat the company s product to the market For example while CLOROX® was still test marketing its new detergent with bleach in selected markets was still test marketing its new detergent with bleach in selected markets P&
P&G G lalaununchched ed TiTide de wiwith th BlBleaeach ch nanatitiononalally ly TiTide de wiwith th BlBleaeach ch ququicicklklyy became the segment leader GLOROX® later withdrew its detergent Despite became the segment leader GLOROX® later withdrew its detergent Despite these disadvantages standard test markets are still the most widely used these disadvantages standard test markets are still the most widely used approach for major in-market testing However many companies today are approach for major in-market testing However many companies today are shifting toward quicker and cheaper controlled and simulated test marketing shifting toward quicker and cheaper controlled and simulated test marketing methods.
C
Coonnttrrool l TTeesst t MMaarrkkeettiinngg Several research firms keep controlled panels of stores that have agreed to Several research firms keep controlled panels of stores that have agreed to ca
carrrry y nenew w prprododucucts ts fofor r a a fefee e CoContntrorolllled ed tetest st mamarkrketetining g sysyststemems s lilikeke ACNielsen’s Scan track and Information Resources Inc s (IRI) Behavior ACNielsen’s Scan track and Information Resources Inc s (IRI) Behavior Sc
Scan an trtracack k inindidivividudual al coconsnsumumer er bebehahavivior or fofor r nenew w prprododucucts ts frfrom om ththee tteelleevviissiioon n sseet t tto o tthhe e cchheecckkoouut t ccoouunntteerr..
In each Behavior Scan market WI maintains a panel of shoppers who report In each Behavior Scan market WI maintains a panel of shoppers who report all of their purchases by showing an identification card at check-out in all of their purchases by showing an identification card at check-out in participating stores and by using a handheld scanner at home to record participating stores and by using a handheld scanner at home to record purchases at nonparticipating stores. With in test stores, IRI controls such purchases at nonparticipating stores. With in test stores, IRI controls such factors as shelf placement price and ia-store promotions for the product factors as shelf placement price and ia-store promotions for the product being tested IRI also measures TV viewing in each panel household and being tested IRI also measures TV viewing in each panel household and
sen
sends ds spespeciacial l comcommermerciacials ls to to panpanel el memmember ber teltelevievisiosion n setsets s DirDirect ect maimaill promotions can also be tested.
promotions can also be tested.
Commercialization Commercialization
Commercialization is the process or cycle
Commercialization is the process or cycle of introducing a new product intoof introducing a new product into the market. The actual launch of a new product is
the market. The actual launch of a new product is the final stage of the final stage of newnew product development
product development, and the one where the , and the one where the most money will have to bemost money will have to be spent for advertising, sales promotion, and
spent for advertising, sales promotion, and other marketing efforts. In theother marketing efforts. In the case of a new consumer packaged good, costs will be
case of a new consumer packaged good, costs will be at least $ 10 million,at least $ 10 million, but can reach up to $
but can reach up to $ 200 million. In general one can say that it will 200 million. In general one can say that it will costcost about a dollar for each dollar of sales turnover achieved.
about a dollar for each dollar of sales turnover achieved.
Commercialization is often confused with sales, marketing or
Commercialization is often confused with sales, marketing or businessbusiness development. The Commercialization process has three key aspects: development. The Commercialization process has three key aspects:
1.
1. The funThe funnel. It inel. It is essents essential to looial to look at many ik at many ideas to gdeas to get one or twet one or twoo products or business that can be sustained long-term
products or business that can be sustained long-term 2.
2. It is a stagIt is a stage-wise-wise procee process and eacss and each stage hah stage has its own kes its own key goals any goals andd milestones
milestones 3.
3. It is vital to inIt is vital to involve kevolve key stakehy stakeholderolders early, ins early, includicluding custong customersmers Commercialization of a product will only take
Commercialization of a product will only take place, if the following four place, if the following four questions can be answered:
questions can be answered:
When? When?
The company has to decide on the introduction timing. When facing the The company has to decide on the introduction timing. When facing the danger of cannibalizing the sales of the company’s other products, if the danger of cannibalizing the sales of the company’s other products, if the
product can be improved further, or if the economy is down, the launch product can be improved further, or if the economy is down, the launch
should be delayed. should be delayed.
Every single bank in Nigeria today has been commercialized. But its sad Every single bank in Nigeria today has been commercialized. But its sad enough to know that most of these banks are
enough to know that most of these banks are not straight forward in their not straight forward in their various dealings with their clines/customers.
various dealings with their clines/customers.
Where? Where?
The company has to decide where to launch its
The company has to decide where to launch its products. It can be in a singleproducts. It can be in a single location, one or several regions, a national or the international market. This location, one or several regions, a national or the international market. This decision will be strongly influenced by the company’s resources, in terms of decision will be strongly influenced by the company’s resources, in terms of capital, managerial confidence and
capital, managerial confidence and operational capacities. Smaller operational capacities. Smaller companies usually launch in attractive cities
companies usually launch in attractive cities or regions, while larger or regions, while larger companies enter a national market at once.
companies enter a national market at once. Global roll outs are
Global roll outs are generally only undertaken by multinationalgenerally only undertaken by multinational conglomerates, since they have the necessary size and make use of conglomerates, since they have the necessary size and make use of
international distribution systems (e.g., Unilever, Procter & Gamble). Other international distribution systems (e.g., Unilever, Procter & Gamble). Other multinationals use the “lead-country” strategy: introducing the new product multinationals use the “lead-country” strategy: introducing the new product in one country/region at a
in one country/region at a time (e.g. Colgate-Palmolive).time (e.g. Colgate-Palmolive).
To Whom? To Whom?
The primary target consumer group will have
The primary target consumer group will have been identified earlier bybeen identified earlier by research and test marketing. These
research and test marketing. These primary consumer groups should consistprimary consumer groups should consist of innovators, early adopters, heavy users
of innovators, early adopters, heavy users and/or opinion leaders. This willand/or opinion leaders. This will ensure adoption by other buyers in the market place during the product ensure adoption by other buyers in the market place during the product growth period.
growth period.
How? How?
The company has to decide on an
The company has to decide on an action plan for introducing the product byaction plan for introducing the product by implementing the above decisions. It has to develop a viable
implementing the above decisions. It has to develop a viable marketing mixmarketing mix and create a
and create a respective marketing budget.respective marketing budget.
Test marketing gives management the information needed to make a final Test marketing gives management the information needed to make a final decision about whether to launch the new product. If the company goes decision about whether to launch the new product. If the company goes
ah
aheaead d wiwith th cocommmmerercicialalizizatatioion— n— inintrtrododucucining g ththe e nenew w prprododucuct t ininto to ththee market—it will face high costs The company may have to build or rent a market—it will face high costs The company may have to build or rent a ma
manunufafactctururining g fafacicililityty. . AnAnd d it it mamay y hahave ve to to spspenend d in in ththe e cacase se of of a a neneww co
connsusummer er papackckaageged d ggooood d bbetetwweeeen n $1$10 0 mimilllilion on aand nd $2$200 00 mmilillilioon n ffor or advertising sales promotion, and other marketing efforts in the first year. advertising sales promotion, and other marketing efforts in the first year. The company launching a new product must first decide on introduction The company launching a new product must first decide on introduction timing. If DaimlerChrysler s new fuel cell electric car will eat into the sales timing. If DaimlerChrysler s new fuel cell electric car will eat into the sales of the company s other cars its introduction may be delayed If the car can be of the company s other cars its introduction may be delayed If the car can be impro
improved furtheved further, or r, or if the if the econoeconomy is my is downdown, , the companthe company y may wait untilmay wait until tthhe e ffoolllloowwiinng g yyeeaar r tto o llaauunncch h iitt..
Ne
Next, the xt, the comcompanpany y musmust t decdecide ide whewhere re to to laulaunch nch the new the new proproducduct—it—in n aa single location, a region the national market or the
single location, a region the national market or the international market. Fewinternational market. Few companies have the confidence capital and capacity to launch new products companies have the confidence capital and capacity to launch new products into full national or international distribution. They will develop a planned into full national or international distribution. They will develop a planned market rollout over time. In particular small companies may enter attractive market rollout over time. In particular small companies may enter attractive cities or regions one at a
cities or regions one at a time Larger companies, however may quickly intro-time Larger companies, however may quickly intro-1uce new models into several regions or into the full national market.
1uce new models into several regions or into the full national market. There are the
There are the following step of commercialization.following step of commercialization.
o
o Launch the productLaunch the product o
o Produce and placeProduce and place advertisementsadvertisements and other and other promotions promotions o
o Fill theFill the distributiondistribution pipeline with productpipeline with product o
o Critical path analysisCritical path analysis is most useful at this stageis most useful at this stage
Organizing for new product
Organizing for new product DevelopmentDevelopment
Many companies organize their new product development process into the Many companies organize their new product development process into the or
ordederlrly y seseququenence ce of of ststarartitingng-w-witith h ididea ea gegeneneraratition on anand d enendiding ng wiwithth commercialization Under this sequential product development approach one commercialization Under this sequential product development approach one company department works individually to complete its stage of the process company department works individually to complete its stage of the process before passing the new product along to the development next department before passing the new product along to the development next department
an
and d ststagage. e. ThThis is orordederlrly y ststepep-b-by y ststep ep prprococesess s cacan n hehelp lp brbrining g cocontntrorol l toto com
compleplex x and risky projeand risky projectscts. . But it But it alsalso o can be can be dandangergerousously ly sloslow. w. In In fasfastt cha
changinging ng hihighlghly y comcompetpetitiitive ve worworks ks mamarkerkets ts sucsuch h sloslow w but but sursure e proproducductt de
devevelolopmpmenent t cacan n reresusult lt in in prpro4o4ucuct t fafaililurures es lolost st sasaleles s ararid id prprofofitits s anandd cru
crumblmbling ing mamarkerket t pospositiitions ons SpeSpeed ed to to marmarket ket and and redreduciucing ng new new proproducductt development cycle time have become pressing concerns to companies in all development cycle time have become pressing concerns to companies in all
industries. industries.
In order to get their new products to market more quickly many companies In order to get their new products to market more quickly many companies are adopting a faster team-oriented approach called simultaneous product are adopting a faster team-oriented approach called simultaneous product development (or team bad or collaborative product-development) Under this development (or team bad or collaborative product-development) Under this ap
apprproaoach ch cocompmpanany y dedepapartrtmementnts s wowork rk clclososelely y totogegethther er ththrorougugh h crcrososss functional teams overlapping the steps in the product development process functional teams overlapping the steps in the product development process to save time and increase effectiveness Instead of passing the new product to save time and increase effectiveness Instead of passing the new product from department to department the company assembles a team -of people from department to department the company assembles a team -of people from various departments that Stays with the new product from start to from various departments that Stays with the new product from start to fin
finishish. . SucSuch h teateams ms usuusuallally y incincludlude e peopeople ple frfrom om the the marmarketketing ing finfinancancee de
desisigngn, , mamanunufafactctururining g anand d lelegagal l dedepapartrtmementnts s anand d eveven en susupppplilier er anandd ccuussttoommeer r ccoommppaanniieess..
top
top manmanageagemenment t givgives es the the proproducduct t devdeveloelopmepment nt teateam m gengeneraeral l strstrateategicgic direction but no clear cut product idea or work plan It challenges the team direction but no clear cut product idea or work plan It challenges the team with stiff and seemingly contradictory goals— turn out carefully planned with stiff and seemingly contradictory goals— turn out carefully planned and super
and superior new ior new proproducducts ts but do but do it it quiquicklckly y —a—and nd thethen n givgivers the ers the teateamm wh
whatatevever er frfreeeedodom m anand d reresosoururceces s it it neneededs s to to memeet et ththe e chchalallelengnge e In In ththee sequential process a bottleneck at one phase can seriously slow the entire sequential process a bottleneck at one phase can seriously slow the entire pr
proteotect ct In In the the simsimultultaneaneous ous appapproaroach, ch, if if one one funfunctictionaonal l arearea a hithits s snasnags gs itit works to resolve them while the team moves on.
The Data Collection
The Data Collection
Primary Data Primary Data
BOOKS BOOKS
Principal of Marketing (Eleventh Edition) Principal of Marketing (Eleventh Edition) Part III Part III Chapter# 9 Chapter# 9 Page # 274,276,280,282 Page # 274,276,280,282 Web site Web site www.learnmarketing.net www.learnmarketing.net www.wikipedia.org www.wikipedia.org
www.infotrends.com www.infotrends.com Secondary Data Secondary Data Organization Organization
P&G Pakistan Private (Ltd) P&G Pakistan Private (Ltd)
Web site Web site www.pg.com www.pg.com
Practical Study
Practical Study
Procter & Gamble Pakistan Pvt Ltd
Procter & Gamble Pakistan Pvt Ltd
WHO WE ARE WHO WE ARE
Three billion times a day, P&G brands
Three billion times a day, P&G brands touch the lives of people around touch the lives of people around the world. We arethe world. We are one of the largest and
one of the largest and strongest portfolios of trusted, quality, leadership brands. At P&G,strongest portfolios of trusted, quality, leadership brands. At P&G, the people who develop and build the brands are the foundation of our success.
the people who develop and build the brands are the foundation of our success.
•
• Building Diversity in the OrganizationBuilding Diversity in the Organization •
• Developing Skills and Nurturing TalentDeveloping Skills and Nurturing Talent •
• Providing Quality Assurance, Meeting Safety StandardsProviding Quality Assurance, Meeting Safety Standards
OUR COMMITMENT OUR COMMITMENT
At P&G, we believe in
At P&G, we believe in giving back to the communities we giving back to the communities we live in. Corporate sociallive in. Corporate social responsibility is close to P&G’s heart. P&G develops and runs
responsibility is close to P&G’s heart. P&G develops and runs several initiatives andseveral initiatives and programs aimed at helping communities and improving people’s lives, especially programs aimed at helping communities and improving people’s lives, especially
children. children.
OUR HISTORY OUR HISTORY
P&G commenced operations in Pakistan in 1991. Headquartered in Karachi, our goal was P&G commenced operations in Pakistan in 1991. Headquartered in Karachi, our goal was
to become the finest global consumer
to become the finest global consumer goods company operating locally in Pakistan. Togoods company operating locally in Pakistan. To fulfill this goal, we are serving Pakistani consumers with 12 brands that strive to make fulfill this goal, we are serving Pakistani consumers with 12 brands that strive to make
their everyday lives better. their everyday lives better.
PRODUCT INFORMATION PRODUCT INFORMATION
We are committed to providing products of consistently excellent quality and standards We are committed to providing products of consistently excellent quality and standards
— products that have a
— products that have a positive effect on the lives of the world's consumers. As positive effect on the lives of the world's consumers. As wewe continue to succeed in this aim, we can keep growing as a marketing community. continue to succeed in this aim, we can keep growing as a marketing community.
PRODUCTS RANGE PRODUCTS RANGE
Data Analysis
Data Analysis
Why are some companies so successful at new product development? And Why are some companies so successful at new product development? And how do some businesses make it seem
how do some businesses make it seem so easy – one new so easy – one new product winner product winner after another? Consider Procter & Gamble: Total sales at P&G increased by after another? Consider Procter & Gamble: Total sales at P&G increased by $8 billion in 2004, with new product winners playing a important role. The $8 billion in 2004, with new product winners playing a important role. The IRI cites P&G as the clear winner in
IRI cites P&G as the clear winner in its annual New Product Pacesettersits annual New Product Pacesetters report: In the non-food category, five P&G new products were in the top ten report: In the non-food category, five P&G new products were in the top ten best-sellers, with Prilosec OTC and Crest Whitestrips Premium in the #1 and best-sellers, with Prilosec OTC and Crest Whitestrips Premium in the #1 and
#2 positions. #2 positions.
Exceptional performance in product development in companies such as
Exceptional performance in product development in companies such as P&GP&G is no accident. Rather, it’s the result of a
is no accident. Rather, it’s the result of a disciplined, systematic approachdisciplined, systematic approach based on best practices. This article highlights many of the key factors that based on best practices. This article highlights many of the key factors that
distinguish best performing businesses, such as P&G, from the rest. To show distinguish best performing businesses, such as P&G, from the rest. To show proof that these best practices really do have an impact on
proof that these best practices really do have an impact on performance,performance, we present research conclusions from a recent major APQC study.2 Not we present research conclusions from a recent major APQC study.2 Not surprisingly, P&G, an exemplary company in new
surprisingly, P&G, an exemplary company in new product development, hasproduct development, has implemented many of these practices; thus, we use the company as a
implemented many of these practices; thus, we use the company as a superbsuperb a case illustration to show many of these best
a case illustration to show many of these best practices in action. Authors’practices in action. Authors’ notes: In this article, we use the
notes: In this article, we use the term “new products” to mean any change toterm “new products” to mean any change to the product visible to
the product visible to the consumer or customer; these include the consumer or customer; these include true new-to-true new-to-world products as well as new items in
world products as well as new items in an existing product line, significantan existing product line, significant modifications and improvements, and extensions. The term “customer” modifications and improvements, and extensions. The term “customer” means immediate customer, for example a
means immediate customer, for example a retailer; and the term “consumer”retailer; and the term “consumer” means the end user.
means the end user.
The Innovation or Initiatives Diamond to guide
Four major factors or forces drive
Four major factors or forces drive a business’s new a business’s new project performance,project performance, according to the APQC (American Productivity & Quality Center)
according to the APQC (American Productivity & Quality Center) best best practices study. The Innovation Diamond3 in
practices study. The Innovation Diamond3 in Exhibit 1 illustrates these four Exhibit 1 illustrates these four points of performance:
points of performance:
•
• Having a product innovation and technology strategy in Having a product innovation and technology strategy in place for theplace for the
business. business.
•
• Having an effective and efficient idea-to-launch process or Stage-Having an effective and efficient idea-to-launch process or
Stage-Gate® system. Gate® system.
•
• Resource commitment and focusing on the Resource commitment and focusing on the right projects – portfolioright projects – portfolio
management. management.
•
• People – having the People – having the right climate and culture, effective cross-right climate and culture, effective
cross-functional teams, and senior management commitment to new product functional teams, and senior management commitment to new product development.
development.
Procter & Gamble’s management in the
Procter & Gamble’s management in the 1990s subsequently transformed the1990s subsequently transformed the triangle into their Initiatives Diamond, shown in figure P&G’s
triangle into their Initiatives Diamond, shown in figure P&G’s major “aha”major “aha” was that there is no one
was that there is no one key to success in product innovation, and thuskey to success in product innovation, and thus management stepped back
management stepped back
from a focus on individual initiatives and looked at the broader picture. For from a focus on individual initiatives and looked at the broader picture. For example, having a great idea-to-launch process is not sufficient – it’s not a example, having a great idea-to-launch process is not sufficient – it’s not a standalone driver of
standalone driver of positive performance.positive performance.
P&G’s Initiatives Diamond serves as a guide for each business’s product P&G’s Initiatives Diamond serves as a guide for each business’s product innovation efforts, and helps to focus
innovation efforts, and helps to focus management’s attention on what ismanagement’s attention on what is important to success. Here’s what
important to success. Here’s what Bob McDonald, P&G’s Vice Chairman of Bob McDonald, P&G’s Vice Chairman of Global Operations, says: “The Initiative Diamond played a
Global Operations, says: “The Initiative Diamond played a significant rolesignificant role in improving the business results in P&G’s Fabric & Home Care global in improving the business results in P&G’s Fabric & Home Care global business unit. This work brought us a new
business unit. This work brought us a new discipline to manage our discipline to manage our innovation programs, and yielded a major increase
innovation programs, and yielded a major increase in the in-market successin the in-market success of our initiatives. We
of our initiatives. We aligned our organization on how to aligned our organization on how to use Stage-Gate®use Stage-Gate® success criteria and portfolio and
success criteria and portfolio and resource management to deliver better resource management to deliver better innovations for the consumers we serve.
