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Explain the critical factors in the new product development process. Critically analyze the NPD effectiveness in the industry.
NEW PRODUCT DEVELOPMENT
For a new product to be successful, it needs to be launched proactively in the “right” market at the “right” time with the “right” marketing plan. The key is to create strategic competitive advantage that can be sustained over a period of time.
At the first step of process, it is essential to consider three factors for screening the product ideas. These factors are the reason for the new product, the extent to which it is new, and the opportunity cost and development risk.
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Reason for the New Product
Any organization needs to have a clear idea about why it is developing the new product and how it fits with its strategic vision. The internal and external forces are key factors leading towards new product development. The greater the overlap between the two forces, the higher will be chance of success.
Reebok has a history of doing the extraordinary. The Massachusetts athletic shoe company with British roots stunned spectators when it exploded off the blocks in 181 and quickly moved to the head of the sports and fitness industry pack. Reebok sales went from zero to $1 billion in less than 10 years, then doubled, then jumped by another billion dollars. In 187, Reebok was acknowledged as the fastest-growing company in America by virtually every business magazine and surpassed current industry leader, Nike.
But like the young superstar whose success is based on raw talent rather than disciplined training, Reebok found itself struggling in the early 0s. Its growth had outpaced its capabilities to manage the business. Sales were flat, and operating costs were out of control. There was high turnover among senior leaders. The company that had dazzled the business world was running on fumes. It was time to regroup and re-strategize.
As part of Reeboks 001 commitment, the Reebok long-range planning team outlined goals it has to reach in order to fulfill the vision of revolutionizing sports and fitness through explosive creativity and innovation.”
To stay ahead of the competition, athletic shoe companies must constantly look for new product innovations. The traditional product life cycle theory indicates that typically a product will have an s-curve with stages of growth, maturity, saturation and decline in sales and profits. This theoretical model seems to hold true also for athletic shoe products, which means that the question of product development and new- product innovations is important in athletic shoe companies. It is sometimes difficult to define what is meant by a new product. Improvements to an existing product can render that product so new as to make it seen by prospective purchasers as a genuinely new product, and if an existing product is launched to a new market or to other purposes, that product is also new for the customer.
An underlying assumption of new-product development process models is that new-product ideas can be dropped at any stage of the process if they do not satisfy the criteria for success at the particular stage. The process can be divided into to sections front end planning and implementation. The front end determines what service concepts will be developed. The organization is assumed to have an overall strategic vision and mission, which determine the new-product strategies of the organization. (Zeithaml & Bitner 16, 17-00) The different strategic options for new-product strategies are shown in the figure.
The first actual step in the new-product development (NPD) is the idea generation, which can be systematic search of new ideas. Typical sources of ideas may be formal brainstorming, solicitation of ideas from employees and customers, lead-user research, learning about competitor’s offerings etc. According to studies referred by Kotler more than the half of the new-product ideas come from within the company, one quarter comes from customers and the rest mainly from competitors. During the idea generation a large number of ideas are often created. The purpose of screening the ideas is to reduce the number of ideas. The idea screening is the appropriate time to review carefully the question of product line compatibility. (Kotler et.al. 1, 1-; Zeithaml & Bitner 16, 0). The key questions to ask when screening product ideas are, if there is a market for the product, if the product is a right one for the company product strategy and if the product can be produced profitably (Morgan 16).
A clear definition of the product concept should be the outcome of the product development and evaluation stage. The new product concept should then to be evaluated by employees and customers. The next step is to determine the feasibility and potential profit implications. Demand analysis, revenue projections, cost analyses, and operational feasibility are assessed at this stage. The stage will involve preliminary assumptions about the costs of hiring and training personnel, delivery system enhancements, facility changes and any other projected costs. (Zeithaml & Bitner 16)
Once the new product concept has passed all the front-end planning stages, the concept is ready for the implementation stages. During this phase, the concept is refined to the point where a detailed product blueprint representing the implementation plan for the product can be produced and tested by the personnel. The market testing phase is in sports industry often implemented by introducing the new product to a certain group of customers or representatives of intermediary stakeholders. If the product has passed all the former stages the service goes live and is introduced to the marketplace (commercialization). A very important phase is the post introduction evaluation. At this point, the information gathered during commercialization can be reviewed and changes made to the delivery process, staffing or marketing-mix variables. (Zeithaml & Bitner 16)
Figure illustrates the New-Product development process (Zeithaml & Bitner 16, 00), which represents a traditional model for NPD.
Extent of Newness
• New-to-the world-product. Products that are breakthroughs and create an entirely new market; change the existing behavior of customers.
After the launching of NIKE AIR, by Nike, share prices of REEBOK fell considerably and they had to come up with a totally new product to sustain their market value. Reebok engineered the DMX technology; the new high-tech shoes hit the market with a racy name DMX Series 000. They were a success. Reeboks footwear sales in the U.S. were growing again for the first time in years, and the companys reputation was rebounding. Reebok had reinvented itself. The DMX running shoe was called it a breakthrough technology.
• New-product-lines. Products that are new for an organization but not for the marketplace, an organization first entry into an established market.
With the globalization on the rise, and more and more companies venturing in the Asian market, Reebok firmly lay its foot in the market. However, they were not an instant success. The product line that they had was totally different as compared to the European and American market. They had to create new products in their product line. The CRICKET craze in the Asian market made Reebok create a totally new product, and they did it very successfully because of its marketing strategy.
• Improvements in revisions to existing products. Products that are made better in terms of performance or value by replacing existing products.
The old Reebok product lines were taken of the selves. These products were all given a new touch. The new trend of fashion accompanied the new products. This made the product more attractive and trendy. The range of apparel is a fusion of fitness and lifestyle. This new collection is being launched under bright bold and vibrant apparel lines, each distinct and differentiated from other in functionality, style, colors and fabrics.
DESIGNING AN EFFECTIVE MARKETING PLAN
Designing an effective marketing plan requires measurement of customer preferences. Conjoint analysis is a useful technique for estimating customer preference parameters such as part-worth, the importance each customer assigns to various parts of a product offering. Such estimates would help designing marketing plan for different marketing segments and also in calculating preference shares of new product and other competitive offering.
Reeboks performance and competitiveness in the athletic shoe market was hindered by some fundamental sports marketing problems. The most fundamental is a long-term problem of ineffectively scanning the environment. This contributed to a more immediate problem of either not targeting, or failing to effectively target, the most profitable segments of the athletic shoe market. Reebok is strongest in the over-45 age segments and weakest in the 1-4 age segments. The over-45 group has the most disposable income, but the 1-4 age groups purchase athletic shoes much more frequently and are also willing to spend more on shoes for fashion and coolness.
These problems also contribute to a secondary problem of an ineffective marketing mix. Reebok was focused more on placing relatively less expensive shoes in department stores and promoting them with frequently changing promotional campaigns.
With all the above mentioned factors, Reebok should look into defending its current market share in the over-45 age groups and also pursue the 1-5 age groups. The new marketing strategy should be altered to reach the 1-5 age groups by seeking the new product endorsements from more well-known, successful and appealing role models and athletes. Pricing strategy should also be changed for this segment to increase the brands image and perception. By defending its stronghold on the over-45 segment and selectively targeting the growing younger segments, Reebok can improve its position with relatively little risk.
CONCLUSION
In recent years, a great deal of research has been focused on the new product development (NPD) process, showing that certain common factors separate winners from losers in the NPD race.
Experience shows that successful NPD performances have multiple roots and that winners excel on most success factors Superior performance on just a few factors is not enough. Moreover, attention to quality is as important in NPD as it is in order processing or manufacturing. The following elements contribute to a high-quality NPD process
• Quality of execution--attention to what the company does and how it accomplishes its work--is critical. NPD is a discipline that people and organizations can learn.
• Performance measures generate action and help companies monitor NPD performance and assure the availability of necessary resources.
• The ability to make tough go/kill decisions is critical if companies are to use resources wisely.
• A market orientation helps guarantee that products will have a market waiting for them when they are ready for commercialization.
• A clear but flexible definition of the proposed new product is critical to NPD success.
• Companies must do their homework in the form of initial screenings of product ideas, preliminary market assessments, detailed market research, test marketing or test selling, and pre-commercialization business analyses.
• Procedural flexibility allows the exercise of professional discretion so that NPD processes do not drag on unnecessarily or squander resources.
• Involvement of customers throughout the NPD process minimizes the risk of developing the wrong product, develops lead customers, and speeds market penetration.
All companies that seek to become NPD winners need to define clearly the contribution they want new products to make to their strategic future, assess the degree to which their current NPD performance is up to this task, and identify gaps between current capability and future requirements. When such gaps exist, companies must decide how to fill them or reduce their ambitions. Sometimes a consultant is in a good position to step in at this point to refocus peoples operational preoccupations toward exploration of larger possibilities and to point the way to changes in the corporate climate and procedures. Companies need the support of their staff to succeed. Staff members often resist change until they see potential benefits in changing their behavior--both for the company and for themselves.
Companies seeking NPD improvement also need to recognize the multilevel nature of the process and to respect the highly interconnected nature of the elements that determine NPD performance. Quick fixes or attempts to patch holes cannot succeed. NPD calls for a system view and system solutions.
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