CONTENTS

1) INTRODUCTION.
A) WHAT IS NEW PRODUCT DEVELOPMENT?
B) WHAT IS NEW PRODUCT?

1) TYPES OF NEW PRODUCT

2) TEST MARKETING FOR NEW PRODUCT:-

• CONSUMER GOODS TESTING.
• BUSINESS GOODS TESTING.

1) NEW PRODUCT DEVELOPMENT PROCESS.

2) CASE STUDY OF KELLOG’S.

3) CONCLUSION.
4) BIBLIOGRAPHY.

INTRODUCTION
Definition
In business and engineering, new product development (NPD) is the term used
to describe the complete process of bringing a new product or service to market.
There are two parallel paths involved in the NPD process: one involves the idea
generation, product design and detail engineering,
The other involves market research and marketing analysis.
Companies typically see new product development as the first stage in
generation commercializing new products within the overall strategic process of
product life cycle management used to maintain or grow their market share.

What Is New Product Development

New product development is a process which is designed to develop test and
consider the variability of products which are new to the market in order to
ensure the growth or survival of the organization.

What Is New Product

A product that opens up entirely new market.
A product that adapts or replaces an existing product.
A product that significantly broadens the market for an existing product.
An old product introduced in a new market.
An old product packaged in a different way.
An old product marketed in a different way.

Types Of New Product

 A Company can develop new products in its laboratories or it can contact with
independent researchers or new product development firms to develop
specific new products. We can identify six categories of new products :-

1) New to world products :- Those products which can create an entirely new
market. Example Radio, TV, Computers.

2) New product lines :- New product that allow the company to enter into an
established market for the first time. Ex Nokia entered to Pakistan market.

3) Addition to existing product lines :- New product supplements the existing

product lines. Ex SWIFT of Suzuki Pakistan.

4) Improvements and revisions of existing products :- New products that provide

improved performance or greater perceived value and replace existing products. For
Example Intel Centrino duo processor.

5) Repositioning :- Existing products that are targeted to new markets or market

segments. Ex chocolates towards adults.

6) Cost reductions :- New product that provides similar performance at a lower cost.
Ex Celeron- Pentium 2.

Challenges in new product development-

 Change and Configuration Management

An effective change and configuration management process allows companies to

increase innovation, improve product quality, reduce product cost, and improve
time-to-market.

Electromechanical Product Development

Manage the challenges related to concurrent development of electrical,

mechanical and embedded software designs to improve design reuse, product
cost, time-to-market and product quality.

Global Product Development

Your answer for meeting aggressive product development objectives while

working with distributed networks that demand instant access to product and
process information throughout the lifecycle.

Lean Product Development

Meet business objectives while systematically making long-term process

improvements through a reduction in non value-added steps, smoother
information flow, enhanced knowledge capture and continuous learning.

Technical Publications

Concurrently design your products and associated publications to favorably

impact your market opportunity, product acceptance, service revenue, and
customer satisfaction.

Failure of new product development-

• Marketers assess the marketing climate inadequately.

• The wrong group is targeted.
• A weak positioning strategy is used.
• A less than optimal “configuration” of product attributes and benefits are selected.
• The wrong group is targeted.
• A questionable pricing strategy is implemented.
• The advertising campaign generates an insufficient level of new product/new
service awareness.
• Cannibalization depresses corporate profits.
• Over-optimism about the marketing plan leads to a forecast that cannot be
sustained in the real world.
• The marketing plan for the new product or service is not well implemented in the
real world.
• The marketer believes that the new product and its marketing plan has died and
cannot be revived because the competitor’s product is better.
• Too much competition in the market.

Stages of New Product Development

Idea Generation:- Idea for a product can be obtained using basic research
SWOT analysis. Idea generation can begin when you have done your opportunity
analysis.

Idea screening :- In this we consider all new ideas in idea pool and eliminate
ones that are perceived to be least likely to succeed.
 The screeners have to consider these questions-
Will the consumer in target market benefit from this product?
What is the growth and size forecast of market segment?
Is it technically feasible to produce the product?

Concept testing & analysis :- This stage requires formal evaluation of

product concept by consumers usually some form of marketing research like-
Who is target market?
Who is decision maker in purchasing process?
How will consumer react to this product?
How will product can be created cost effectively?

Product development :- Estimate selling price based upon competition and

consumer feedback.
Estimate sales volume based upon size of market.

Estimate profitability and breakeven point

Test marketing :- Estimate selling price based upon competition and

consumer feedback.
Estimate sales volume based upon size of market.

Estimate profitability and breakeven point

Commercialization :- Launch the product.

Produce and place advertisements and other promotions.

Fill the distribution pipeline with products.

 CASE STUDY OF KELLOG’S

Introduction
In a rapidly changing and competitive business environment, it is not easy to predict:
• future trends in consumer tastes and preferences •
• competitors' actions
• market conditions.
Creating new products or making changes to existing brands can be expensive. It involves making
investment decisions now, in the hope of making a return later. Weighing up future returns against
an investment is a crucial part of a manager's job.
It always involves an element of risk, because the future is never certain. Managers' previous
experience, together with market research information helps them to predict future events and
outcomes. However, all business activities involve some element of risk. There is often said to be a
link between risk and return. The more you risk, the higher the likely returns (or profits). However,
a balance must be struck.
It follows from this that decisions about a brand, (e.g. whether to develop it, maintain it, allow it to
decline, or even kill it off) involve much discussion. In deciding to develop a brand, managers have
to decide how much investment to make and to forecast the likelihood of a successful outcome.
Brand managers aim to develop a long-term strategy to meet a range of objectives such as:
• growing market share
• developing a unique market position
• creating consumer or brand loyalty
• generating a targeted level of profit.
• This case study describes a major investment in Kellogg's Special K. It
how the company's investment in new product development served to strengthen a
global brand.
 The product life cycle-
Each product has its own life cycle. It will be ‘born’, it will ‘develop’, it will ‘grow old’
and, eventually, it will ‘die’. Some products, like Kellogg’s Corn Flakes, have retained their
market position for a long time. Others may have their success undermined by falling market share
or by competitors.
The product life cycle shows how sales of a product change over time.
The five typical stages of the life cycle are shown on a graph. However, perhaps the most important
stage of a product life cycle happens before this graph starts, namely the research and development
(R&D) stage. Here the company designs a product to meet a need in the market. The
market research - to identify a gap in the market and of product development to ensure that the
product meets the needs of that gap - are called ‘sunk’ or start-up costs.
Nutri-Grain was originally designed to meet the needs of busy people who had missed breakfast. It
aimed to provide a healthy cereal breakfast in a portable and convenient format.
1. Launch - Many products do well when they are first brought out and Nutri-Grain was no
exception. From launch (the first stage on the diagram) in 1997 it was immediately successful,
gaining almost 50% share of the growing cereal bar market in just two years.
2. Growth - Nutri-Grain’s sales steadily increased as the product was promoted and became well known
maintained growth in sales until 2002 through expanding the original product with new developments of
format. This is good for the business, as it does not have to spend money on new machines or equipme
production. The market position of Nutri-Grain also subtly changed froma‘misse breakfast’ product
to an all-day healthy synced.

3. Maturity - Successful products attract other competitor businesses to start selling similar
products. This indicates the third stage of the life cycle - maturity. This is the time of maximum
profitability, when profits can be used to continue to build the brand. However, competitor
from both Kellogg itself (e.g. All Bran bars) and other manufacturers (e.g. Alpen bars) offered the
same benefits and this slowed down sales and chipped away at Nutri-Grain’s market position.
Kellogg continued to support the development of the brand but some products (such as Minis
Twists), struggled in a crowded market. Although Elevenses continued to succeed, this was not
enough to offset the overall sales decline.

Not all products follow these stages precisely and time periods for each stage will vary widely.
Growth, for example, may take place over a few months or, as in the case of Nutri-Grain

several years.

4. Saturation- This is the fourth stage of the life cycle and the point when in the marketis ‘full’. Most
people have the product and there are other, better or cheaper competitor productts. This is called
market saturation and is when sales start to fall. By mid-2004 Nutri-Grain found its sales declining
whilst the market continued to grow at a rate of 15%.

5. Decline - Clearly, at this point, Kellogg had to make a key business decision. Sales were
the product was in decline and losing its position. Should Kellogg let the product ‘die’, i.e. withdraw it
from the market, or should it try to extend its life?
Strategic use of the product life cycle

When a company recognizes that a product has gone into decline or is not performing
as well as it should, it has to decide what to do. The decision needs to be made within
the context of the overall aims of the business.
Kellogg’s aims included the development of great brands, great brand value and the
promotion of healthy living.
Strategically, Kellogg had a strong position in the market for both healthy foods and
convenience foods. Nutri-Grain fitted well with its main aims and objectives and
therefore was a product and a brand worth rescuing.
Kellogg decided to try to extend the life of the product rather than withdraw it from the
market. This meant developing an extension strategy for the product. Ansoff’s matrix is
a tool that helps analyze which strategy is appropriate. It shows both market-orientated
and product-orientated possibilities.
Implementing the extension strategy for Nutri-Grain
Having recognized the problems, Kellogg then developed solutions to re-brand and re-
launch the product in 2005.
Fundamental to the re-launch was the renewal of the brand image.
Kellogg looked at the core features that made the brand different and modelled the new
brand image on these. Nutri-Grain is unique as it is the only product of this kind that is
baked. This provided two benefits:
• the healthy grains were soft rather than gritty
• the eating experience is closer to the more indulgent foods that people could be
eating (cakes and biscuits, for example).
The unique selling point, hence the focus of the brand, needed to be the ‘soft bake’.
Researchers also found that a key part of the market was a group termed ‘realistic
snackers’. These are people who want to snack on healthy foods, but still crave a great
tasting snack. The re-launched Nutri-Grain product needed to help this key group fulfil
both of these desires.
Kellogg decided to re-focusinvestment on the core products of Soft Bake Bars and
Elevenses as these had maintained their growth (accounting for 61% of Soft Bake Bar
sales). Three existing Soft Bake Bar products were improved, three new ranges
introduced and poorly performing ranges (such as Minis) were withdrawn.
New packaging was introduced to unify the brand image. An improved pricing structure
for stores and supermarkets was developed.
The marketing mix
Using this information, the re-launch focused on the four parts of the marketing mix:
• Product – improvements to the recipe and a wider range of flavours,
repositioning the brand as ‘healthy and tasty’, not a substitute for a missed
breakfast
• Promotion – a new and clearer brand image to cover all the products in the range
along with advertising and point-of-sale materials
• Place – better offers and materials to stores that sold the product
• Price – new price levels were agreed that did not rely on promotional pricing.
This improved revenue for both Kellogg and the stores.

As a result Soft Bake Bar year-on-year sales went from a decline to substantial growth,
with Elevenses sales increasing by almost 50%.

The Nutri-Grain brand achieved a retail sales growth rate of almost three times that of
the market and most importantly, growth was maintained after the initial re-launch.

Conclusion

Successful businesses use all the tools at their disposal to stay at the top of their
chosen market. Kellogg was able to use a number of business tools in order to
successfully re-launch the Nutri-Grain brand. These tools included the product life cycle,
Ansoff’s matrix and the marketing mix. Such tools are useful when used properly.
Kellogg was able to see that although Nutri-Grain fitted its strategic profile – a healthy,
convenient cereal product – it was underperforming in the market. This information was
used, along with the aims and objectives of the business, to develop a strategy for
continuing success. Finally, when Kellogg checked the growth of the re-launched
product against its own objectives, it had met all its aims to:

• re-position the brand through the use of the marketing mix

• return the brand to growth

• improve the frequency of purchase

• introduce new customers to the brand.

Kellogg’s India

Kellogg's established its subsidiary in India, September 1994,

30th manufacturing plant in India with $30million
New concept of eating breakfast cereal in India.
Despite offering good quality products and being supported by the technical, managerial
and financial resources of its parent, Kellogg's products failed in the Indian market.
Without doing any further research of the market - introduced to Kellogg’s Wheat
Flakes, Frosties, Rice Flakes, Honey Crunch, Special K and Chocos Chocolate Puffs –
none of which have managed to replicate the success.

SWOT ANALYSIS
STRENGTHS
• Hold Global Market
• Strongest brand recognition
• Advertising recollection of all the cereal
• WEAKNESSES
• Have not aggressively developed many new cereal lines
• OPPORTUNITIES
• International expansion
• slowly diversify
• Lower prices will increasing their market share.
• THREATS
• New Entrant
• Price Competition

Strength
• Control 42% of global market share for cereal, which is more than triple the
market share of any of their competitors.
• They have the strongest brand recognition and advertising recollection of all the
cereal manufacturers
Weakness
• Slow erosion of their U.S. market share in the past few years.
• Follower in Pricing Strategy.
• High Prices

Opportunities
• International expansion is the biggest area for growth of Kellogg’s.
• Kellogg can continue to slowly diversify, while still remaining in their core
business area, which will increase their profitability.
• If they can develop a better pricing strategy and guarantee lower prices, they can
reduce costs while increasing their market share.
Threats
 Market Share

cornflakes
mohun
private players

10

20

70

Mohan Mekean, Quaker Oats and Private Labels are using price competition and
product proliferation to erode Kellogg’s share of the market.

MAIN REASONS FOR ITS FAILURE

• Taste of its products did not suit Indian breakfast habits

• Kellogg’s believed that its brand equity carried forward from the West would
mirror its success in India.
• Its advertisements and promotions focused initially on the health aspects of the
product
 • Pricing is believed to play a dominant role in the demand for any product
• A Business Today report said that like other Multinational Companies, Kellogg
had fallen into a price trap.
• Difficult for the larger population to get its products.
• Did not have packs of different sizes to cater for the needs of different consumers

Lesson from Kellogg’s

• Don’t underestimate local competitors
• Remember that square pegs don’t fit into round holes.
• Don’t try and make consumers strangers to their culture
• Proper research should be done in the market

Recommendations
• Price Affordability: Price has always been a very big factor for Indian consumer,
they are very price conscious. High price is one of biggest weakness of this
product.
• Taste: Respondent says that its taste changes when it is taken with milk. So
taste factor need to be taken care of. Taste should be such that it makes good
combination with milk.
• Target Audience: Elder people are the biggest consumers of cornflakes based on
the research. so its target audience should include elder people too.
• Research: Before entering into the market proper analysis of the market should
be done.

BIBLOGRAPHY;

1. www.wikipedia.com..............................................................

2. www.google.com.pk..................................................................

3. Marketing management by kotlar & kellar 12th edition…….