ASSIGNMENT NO 1

NEW PRODUCT PLANNING

SUBMITTED TO:JYOTI MADAM

SUBMITTED BY:PIYUSH PANDEY MARKETING [4B} ROLL NO - 167

NEW PRODUCT PLANNING:-

Most companies recognize that a continuing stream of new product developments is essential to ensure long-term organizational health. But they also recognize that innovation is accompanied by high costs and risks. These risks can be controlled through a well-conceived and professionally managed program of new product development. The key ingredients of such a program are:1. Effective organizational arrangements for new product research and development. 2. Professional staffing. 3. Adequate expenditure for marketing research. 4. The use of sound explicit models for planning and forecasting new product sales.

TYPES OF NEW PRODUCT SITUATIONS:-

Presumably, a new product is introduced by a company when a favorable estimate has been made of its future sales, profits, and other impacts on the firms objective. A new products sales are shaped by many factors, including the size of the potential

market, the nature of competition, and the companys marketing plan and resources.
1.

Product Newness: - We do not rigorously attempt to define a new product but instead distinguish among three categories. The first category, new product innovation, is composed of products that are new both to the market and to the company. These are the really new products that establish new product classes to compete against other product classes. The second category is the new brand, consisting of products that are new to the company but not very new to the market. The new brand represents the efforts of a company to add its own entry into an established product class. The third type of new product is the new model, style, or package size. Here the companys product is only superficially new to the company and to the market and is immediately recognized and understood as an extension or deepening of the companys product line.

2.

Frequency of Purchase:- Products that are purchased occasionally are exemplified by many durable goods, such as automobiles, toasters, industrial equipment, and certain clothing items. These goods exhibit replacement cycles, dictated either by their physical wearing out or their psychological obsolescence from changing styles and tastes.

Because all new products, whether they are purchased once, occasionally, or frequently, must be adopted by a purchasing population who initially do not know about them, we next review some basic concepts of the consumer adoption process.

The Adoption Process For New Products:-

First, he proposes that consumers go through a sequence of five stages when accepting and adopting a new product.

Knowledge occurs when an individual (or other decisionmaking unit) is exposed to the innovations existence and gains some understanding of how it functions.

Decision occurs when an individual (or other decision making unit) engages in activities that lead to a choice to adopt or reject the innovation.

Implementation occurs when an individual (or other decision making unit) puts an innovation into use.

Second. He reports that the rate of adoption of an innovation can be modeled as a function of that innovation attributes.

The type of innovation decision. The communications channels used.

 The nature of the social systems.

Third, Rogers suggests that individuals differ markedly in their likelihood of trying new products. He characterizes innovators as venturesome, early adopters as respectable early majority as deliberate late majority as skeptical and laggards as traditional.

Socioeconomic characteristics. Personality variables. Communication behavior.

Aggregate Diffusion Models:Models of First Purchase

A pure innovative model: Fourt and Woodlock (1960).

One of the earliest market-penetration models was the exponential one proposed by fourt and woodlock (1960) which was tested against several new products.

A pure imitative diffusion model: fisher and pry(1971):A model that has been widely applied to industrial product data is that of fisher and pry (1971).The underlying hypotheses of their model is that when a new product or

process replaces an older one, the rate of adoption is proportional to the interaction of the fraction of the older one still in use and the current level of penetration.

Basss(1969a) Model. Fourt and woodlock model a process of pure innovation. The fishers-pry efforts represent pure imitation models. The innovators are not influenced in their purchase timing by the number of persons who have already bought, but they may be influenced by promotions.

Model extensions and refinements:Even from this brief review, it is clear that models of the diffusion of innovations have been extended to incorporate marketing mix variables, product and market characteristics, different diffusion shapes, time and spatial considerations, and the like.

REPEAT-PURCHASE MODELS FOR NEW PRODUCT:Many new products are of the repurchasable kind. These include virtually all the nondurables consumed by the household and the factory. The sellers of these products are even more interested in the repurchase rate than in the trial

rate. A low trial rate could be attributable to poor distribution, promotion or packaging all of which are correctable. From the exhibit we see that individual consumers, facing a new, frequently purchased product. Must be made aware(advertising, promotion and sampling are the main tools the marketer has control of here) Must be induced to try(advertising, promotion and samples are useful here; distribution and product price may also affect likelihood of trial) Must be induced to repeat once ( product quality, relative price, and distribution affect repeat likelihood).

Other Models:A number of repeat-purchase models for new products are available they differ in assumptions, structure, and reported applicability. They also provides a number of suggestions for research and implementation in this area, including

1. Compare the models:- many models appear to be in regular use. They should be compared both analytically, following the lead of Mahajan, Muller and Sharma(1984). 2. Validate the model:- urban and katz (1983), we should see more reports on what happened in the markets.

3. Combine models and forecasts:- the early suggestion of silk and urban to use two independent models is in line with current thinking that suggests combinig of forecasts to improve forecast accuracy.

4. Developing models from new data bases:- Scanner data and people meters are providing great impetus for new modeling developments throughout the packaged goods market including the new product area.

5. Consider xpert systems:- Expert or rule-based systems are being developed in many areas of marketing,as either substitutes for or complements to the types of models reviewed.

SUMMARY:-

Decision making is most hazardous is new product development and introduction. Companies must introduce new products to survive and yet do so with the knowledge that a substantial number will fail.The costs involved are considerable, and alert management is taking whatever steps will help reduce the risks in the way of organization, professional staffing, marketing research, and model construction.