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New product development

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New product development

  1. 1. PHARMASIM NEW PRODUCTS Consumer Product & Brand Management Marketing 3349
  2. 2. What Is A New Product? <ul><li>New to the world </li></ul><ul><li>New to the company </li></ul><ul><li>Brand extension ( Period 6 ) </li></ul><ul><li>Line extension ( Period 4 ) </li></ul><ul><li>Repositioning ( Period 2 ) </li></ul><ul><li>Model changes </li></ul>
  3. 3. The Risks of New Products <ul><li>Failure rates </li></ul><ul><ul><li>“… no more than 10% of all new products or services are successful -- that is, still on the market and profitable after three years” - Marketing Management (2003) </li></ul></ul><ul><ul><li>95% of new consumer products in US fail;90% of new consumer products in Europe fail 46% - Nielsen BASES and Ernst & Young study (2002) </li></ul></ul>
  4. 4. The Risks of New Products <ul><li>Costs </li></ul><ul><ul><li>Introducing a new national brand can cost $20 million – Marketing Management </li></ul></ul><ul><ul><li>New Product News – “It probably costs $100 million to introduce a truly new soft drink nationally and it costs $ 10,000 to introduce a new flavor of ice cream in Minneapolis. Somewhere in between is a worthless 'average' cost to introduce a new product” </li></ul></ul>
  5. 5. Why New Products Fail <ul><li>Poor planning and strategy </li></ul><ul><ul><li>Market is not attractive </li></ul></ul><ul><li>Poor concept </li></ul><ul><li>Poor execution </li></ul><ul><li>Poor use of research </li></ul><ul><li>Poor technology </li></ul><ul><li>Poor timing </li></ul><ul><ul><li>Changes in tastes/environment </li></ul></ul><ul><li>Bad support from channel </li></ul>
  6. 6. Brand Equity <ul><li>The value your customers perceive to be uniquely associated with your brand </li></ul><ul><ul><li>= Awareness + Associations </li></ul></ul><ul><li>Awareness </li></ul><ul><ul><li>Recall </li></ul></ul><ul><ul><li>Recognition </li></ul></ul><ul><li>Associations </li></ul><ul><ul><li>Perceived Quality </li></ul></ul><ul><ul><li>Image </li></ul></ul>
  7. 7. The Importance of Brand Associations <ul><li>Profitability (ROI): </li></ul><ul><ul><li>PERCEIVED RELATIVE QUALITY </li></ul></ul><ul><ul><li>inferior moderate superior </li></ul></ul><ul><ul><li>RELATIVE high 26% 29% 37% </li></ul></ul><ul><ul><li>MARKET medium 18% 20% 26% </li></ul></ul><ul><ul><li>SHARE low 10% 16% 18% </li></ul></ul><ul><ul><li>SOURCE: PIMS (Profit Impact of Market Strategies; based on 2,200 business units) </li></ul></ul><ul><li>Future Profitability (Stock Price): </li></ul><ul><ul><li>Stock Price = f (ROI, perceived quality) </li></ul></ul><ul><ul><li>ROI and perceived quality exert approximately equal effects </li></ul></ul><ul><ul><li>SOURCE: Aaker, D. A. and R. Jacobson (1994; based on daily measures of NYSE, AMEX, and NASDAQ). </li></ul></ul>
  8. 8. Brand Associations and Line/Brand Extension <ul><li>Brand associations help determine which line and brand extensions will be successful </li></ul>Source: Wes Hutchinson B C REALITY Higher income D E Higher price, & benefits   Segment 2     E D C Original Market New Market 0 2 4 6 8 Breath Mint Toothbrush Close-Up Crest 0 2 4 6 8 Waffles Lollipops Cheerios Froot Loops 0 2 4 6 8 Moisturizer Deodorant Camay Irish Spring 0 2 4 6 8 Video Games CellularPhone Apple IBM 0 2 4 6 8 Bottled Water Scotch Coors Budweiser
  9. 9. Brand Associations and Line/Brand Extension Apple's &quot;user-friendly&quot; image extended best to video games; IBM's &quot;serious business&quot; image extended best to cellular phones. Close-Up's singles-oriented, &quot;romantic&quot; image extended best to breath mints; Crest's family-oriented &quot;dental health&quot; image extended best to toothbrushes. Source: Wes Hutchinson B C REALITY Higher income D E Higher price, & benefits   Segment 2     E D C Original Market New Market 0 2 4 6 8 Breath Mint Toothbrush Close-Up Crest 0 2 4 6 8 Waffles Lollipops Cheerios Froot Loops 0 2 4 6 8 Moisturizer Deodorant Camay Irish Spring 0 2 4 6 8 Video Games CellularPhone Apple IBM 0 2 4 6 8 Bottled Water Scotch Coors Budweiser

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