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MODULE 3 NEW PRODUCT DEVELOPMENT

19.1 PROCESS OF INNOVATION DIFFUSSION & NEW PRODUCT ADOPTION

In new product marketing, one has to understand the process


of innovation diffusion & new product adoption; how an
innovation/idea spreads & gets adopted by the different
segments of a society/market over time.
New product/innovation diffusion is actually defined as the
spreading of a new idea from its source of invention to the
ultimate users. As the innovation spreads, adoption of the
product by the consumers picks up.
Product adoption involves the 4 stages of awareness, interest,
desire & action (AIDA). When a consumer is exposed to a new
product/new product idea, he gets on to the 1st stage of the
process; he becomes aware of the product; then the several
marketing messages create in him an interest towards the
product; he may then develop a desire to try it out; and
finally, he may buy & adopt it.
This, in a nutshell, represents the stages in trying out the
product & even in adopting it as a regular item of
consumption. Some others take more time to embrace the
product.
Some others hesitate for a longer time & yet others are not willing to try
it at all. The differing speed in adoption by consumers is one of the most
crucial issues in new product marketing.

Scientists have classified the new product adopters into 5 categories


based on the relative time taken for adoption: innovators, early
adopters, early majority, late majority & laggards.
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MODULE 3 NEW PRODUCT DEVELOPMENT


19.2 NEW PRODUCT ADOPTERS
Innovators: Innovators are consumption pioneers who are ready to try
out an innovation. And for any product, there will be some pioneers.
The job of the marketer is to locate & identity this group & target the
new products at them initially. Since volume-wise, this group will not be
big, the marketer has to simultaneously cover the next group in the
adopter category the early adopters, who are willing to try out the new
products fairly early.
Early Adopters: The early adopters are the opinion leaders in their
respective community & usually constitute a sizeable segment. For the
success of any new product launch, it is essential that the marketing
program penetrate this particular segment. The 2 characteristics of this
group the venturesome nature of its members & its size make it the
ideal market segment to target. The task involved is to locate, identify &
reach the segment though an appropriate marketing program.
Early Majority: The next group in the adopter category to try out the
new product will be the early majority. Though this group is not that
venturesome like the innovators or that fast in adoption like the early
adopters, they are positive in their approach to new things & try them
out earlier than an average person of their community.
Late Majority: Now comes the late majority in the adopter category
who are by & large skeptical in their approach to new things &
generally try them only after lot of people around them have adopted it.
Laggards: The last category is the laggards who are tradition-bound &
will generally take to a new product only after it becomes a known &
accepted product throughout the market.
It is to be pointed out that an individual, who is an innovator for a particular product,
need not behave in the same way in all new-product-situations. This is true of all
categories. And, thats why the marketers job is so difficult. He has to decide every
time that for this particular product who could be the innovators or the early
adopters?
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MODULE 3 NEW PRODUCT DEVELOPMENT


19.3 NEW PRODUCT ADOPTERS
New product development obviously is a highly expensive, timeconsuming & risk-laden affair. Only those organizations that have the
capacity to absorb the shocks arising out of all these factors can really
go ahead with the task of new product development.
And such organizations invest heavily in R&D and they often have
several new product ideas in queue, each in different stages of
formulation. While such firms remain leaders in their chosen markets,
with all the attendant advantages of being a leader, the vast majority of
the companies prefer to be followers, entering with similar products
after the pioneer establishes the new product.

Most firms go in for improved products


While new products may be the avenue for new profits & growth, it is
not easy to bring in intrinsically new products. In fact, it is generally
beyond the means & capabilities of most enterprises.
So, what most firms do normally is to bring in improved & modified
versions of existing products. Companies make every effort to keep
improving their offers in all possible ways: better features, better
functioning, easier operation, better formula, more aesthetics & so on.

New product failure


It is found that new products suffer from a high attrition rate:
Many new product ideas do not reach the market at all. Considerable time, money
& effort are thus wasted in new product venture.
Even those new products, which manage to reach the market after years of
preparation & work, often fail.
Even with successful new products, in many cases, the success is short-lived; they
die out after the initial boom.
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19.4 NEW PRODUCT FAILURES
Faulty product Idea
Faulty product idea is often a major cause of failure of new product ventures.
Scientists have proved that 23% of product failures can be attributed to bad
product ideas. The following are a few examples of this category

Cibaca Lime Toothpaste


In 1991, Ciba-Geigy launched Cibaca-Lime toothpaste. But despite the 14 genuine
herbal ingredients, the product failed. While people like the lemon flavor in foods,
when it came to brushing, the citrus taste jarred the teeth.

Cool Cats decorated ceiling fans


Polar Industries launched Cool Cats, ceiling fans decorated with cartoon characters,
meant primarily for children. The firm got noted singer Sharon Prabhakar to do the
promotional video & conducted a door-to-door promotion campaign. Polar spent
substantial sums of money on advertising & marketing.
Despite all this, Cool Cats sold barely a few 000 pieces. Polar investigated why the
sales did not take off. When the fan moved, all the colors in the fan dissolved into a
blur. There was no color effect to be seen by the children! There was no other extrafunctional benefit that justified its premium pricing @ Rs 1200/-. The firm later
slashed the prices by 25% & also made the non-metro towns its target markets,
instead of the metros.

Paloma & Nestea iced tea


Another product that has not taken off is iced tea. Nestle tried it in the 1980s with
Paloma & yet again in the 1990s with Nestea. Both left the consumers cold. For the
majority of the consumers, tea was still a hot drink.

Walls frozen desserts


BBLILs Walls range of frozen desserts is another example. It is yet to capture a big
market. It could not be promoted as ice cream for technical reasons. And, since it is
based on vegetable fats, it has gained the name Dalda ka Ice cream, doing
considerable damage to its intended position of a premium product.

MODULE 3 NEW PRODUCT DEVELOPMENT


19.5 NEW PRODUCT FAILURES
Distribution-Related Problems
Distribution can also cause new product failure. The following shows
some instances where distribution-related problems have played havoc
with new products

Nestle Chocolates
When Nestle launched its new chocolates. The product was alright; the
promotion too was alright. In fact, the promotion won several awards.
But, the new product encountered difficulties on the distribution side.
The company insisted that at the retail outlets, its chocolates should be
stored inside refrigerators: otherwise they would melt. The stipulation
resulted in 2 difficulties at the retail level: First, it meant excluding a
majority of the available outlets, as they did not have refrigerators.
Second, chocolates being an impulse buy, the products are not picked
up, if they are not visible upfront in the retail shops.
Nestle eventually had to reformulate its products in line with channel
requirements.

Pepsis Ruffles
Pepsi had problems with its Ruffles chips.
The company decided that the same distribution system (Pepsi) could be
used both for the soft drink & the chips; the rationale was that both
products were breakable & fragile.
But, in actual practice, the 2 differed while being transported along with
the sturdier bottles. Eventually, Pepsi had to drop the combination
arrangement & go in for an independent distribution system for Ruffles.

MODULE 3 NEW PRODUCT DEVELOPMENT


19.6 CONDITIONS FOR NEW PRODUCT SUCCESS
The question is how to avert such failures & ensure new product success?
Analysis shows that several new products fail not because they are
defective, but because the company in question is not properly equipped
to handle them.
Before a firm proceeds with a new product idea, it should find answers
to basic questions such as:
Is the proposed product close to the existing business of the
company? Or, does it constitute an entirely new line of business?
In the latter case, can the company handle the new business?
How new is the proposed product? Is it radically new for the
market? Or, is it similar in some way to already existing products?
If it is a radically new product, how long will it take to get
established? Can the firm sustain the long pioneering stage?
If it is a me-too product, can it make a living in a market already
dominated by early entrants? What is the current level of demand &
what is the market share the firm can hope to get?
Is the product likely to invite retaliation from a strong competitor,
who is already in the same line or in a related line of business? What
are the resources of the firm as compared to those of the dominant
competitors?

The Critical Success Factors


It is seen that high success rate in new products is correlated to the
presence of 3 critical factors:
A unique & superior product idea that yields a real benefit to the
consumer.
Strong technical/production expertise.
A strong market orientation on the part of the company. Often, this
turns out to be a particularly important dimension.

MODULE 3 NEW PRODUCT DEVELOPMENT


19.7 NEW PRODUCT SUCCESSES EXAMPLES
Success of Sumeet
The electric mixer brought out by Sumeet Machines took away some of the tedious
kitchen work from the typical Indian housewife. Today, Sumeet Machines has 60%
share of the 45-brand-200- crore-mixer market in India. Sumeet was the 1st to
launch a stainless steel mixer jar, with blades that could handle heavy grinding
loads; and it had a tough motor capable of running non-stop for 30 minutes.

The product was well received by the Indian housewife for whom it was
a real help. Sumeet also carried continuous improvements over the
years. One model had a work bowl that could handle dry & wet
grinding, liquidizing & blending in one attachment without changing
blades. Once the product-idea caught up, several me-too brands
entered the market. But, Sumeet remained leader throughout.

Good knight Story


Good knight (later taken over by Godrej) is a case of successful new product launch
in the Indian market in recent years. At the root of its success lies the knack of
picking up an innovative product idea & converting it into a marketable product.
GoodKnight was the first of its kind. Transelektra struck a deal with a Japanese
firm, Sumitomo, for supply of know-how & the main chemical, allathrin that went
into the production of the mosquito repellent. Apart from Sumitomo, Roussel was
the only other manufacturer of allathrin. The product generated an overnight
awareness. In the succeeding years, Transelektra made many improvements to the
product.
After securing the patronage of the middle class market through a price of Rs 130
(including the heater & a pack of mats), Transelektra launched a lower priced
cordless version of GoodKnight @ Rs 70 to lure the lower income segment. And still
later, to cater to the up-market segment, the company introduced a sophisticated
liquid vaporizing plug-in model called the GoodKnight liquidator. Today, in the Rs
100 crore mat mosquito repellent market, GoodKnight enjoys 50% market share &
a leadership.