Monday, August 18, 2014

Principles of Marketing - Product Planning and Development

Product Planning and Development
Product planning is the initial step of the overall marketing programme. In the competitive business world, producers try to produce products which can be nearer to consumer expectation. The pressure of competition forces the producers to replace the existing products by developing new consumers’ suitable and friendly products. Product planning covers all activities which enable producers and middle men to determine what should constitute a company’s line of products. Product development covers the technical activities of product research, production and design. The well attempt effort of product development increases the scope to satisfy the needs of the customers.
The product planning and development cover the following decision making area:
(I) What products should be produced?
(II) Expansion of product line.
(III) Determine the new use of its products.
(IV) What brand, package and label are used for different products?
(V) What should be quantity of its production?
(VI) Pricing policy etc.

In short, product planning involves the innovation of new products and improvement in the existing product.  In the words of Karl. H. Tietjen, “Product planning is the act of marketing and commercialization of new products, the modification of existing lines and the discontinuance of marginal or unprofitable items”. As per this definition product planning covers these three considerations.
(I) The development and introduction of new products.
(II) The modification of existing lines to suit the changing consumer needs and preferences and
(III) Elimination of unprofitable products.

Objectives of Product Planning:
Product planning is one of the most important functions of a marketing manager. The following are its objectives:
Ø  To offer products based upon customer needs.
Ø  To diversify, to capitalize on the company’s strength.
Ø  To utilize the available resources more profitability.
Ø  To decide on the elimination of non-profitable products.
Ø  To change the features of the product as per the changes in the market.
Ø  For long-term survival.

Components of Product Planning:
1.       Product Innovation
2.       Product Diversification
3.       Product Development
4.       Product Standardization
5.       Product Elimination
6.       Product Mix & Product Line

1.       Product Innovation: Innovation is a part of continuous improvement. In the absence of innovation, products become stale & hence die in the market. Innovation is required to keep up with the phase of changing market needs. According to Drucker, “Innovation will change customer’s wants, create new ones, extinguish old ones & create new ways of satisfying wants.”
2.       Product Diversification: When a manufacturer offers more products in different areas, it is referred as product diversification. In fact, when a manufacturer diversification. Diversification normally involves business in a new area. E.g.: ITC entering into hotel business, sony entering into film production business.
3.       Product Development: It involves introducing a new product either by replacing the existing one or innovating a completely new product. It can either be brand extension or line extension. Company must be careful while developing new products because research shows that 92% of them fall in the market. Another danger of product development is cannibalization.
4.       Product Standardization: It implies a limitation of types of products in a given class. It gives uniformity in terms of quality, economy, convenience & Value. E.g.: Each model of T.V. gives a different standard. Standardization promises a minimum level of performance & hence is used as a benchmark for quality.
5.       Product Elimination: This involves an emotional decision of withdrawing the existing product line. Decision must be carefully taken based upon current market share, future prospects etc. The product elimination involves reviewing the present product portfolio, analyze their profitability & then decide on discontinuance of a product.
6.       Product Mix & Product Line: Product line is defined as a group of products offered by a company which belongs to same family of products or similar to each other or substitutes. E.g.: Product line of ponds for personal care products includes cold creams, talcum powders, etc. Product Mix is defined as combination of product lines offered by a company. E.g.: Product mix of Bajaj includes two wheelers, home appliances, electrical appliances, financial products etc.

Stages in New Product Development Process
The introduction of new product usually passes through various stages. In each stage, the management must decide whether to move on to next stage with the product idea or not. Practically, in this process some of the ideas will be eliminated at every step. There are six stages involved in the new product development. The stages are given below:
(I) Idea generation: New products are produced on the basis of new ideas. Ideas may be generated from various sources like customers, dealers, distributors, salesman, top executive, consultancy organisation, Research and Development Department etc. The first step is to collect ideas as many as possible so that the company can find out one of the best idea out of those ideas to convert the same in to actual product.
(II) Screening of Ideas: All new ideas cannot be converted into products as it requires heavy capital investments. Those ideas should be screened and all unworkable ideas should be dropped. Only most viable, feasible and promising one should be selected for further processing. The company uses the concept testing method. In this method, consumer response to a description or picture or drawings is measured even before the product is actually produced. The purpose is to find out few best ideas.
(III) Business Analysis: During this stage, an attempt is made to predict the economic consequences of the product for the company. In these stages, the management should perform the following:
(a) Identify product features.
(b) Estimate market demand and product profitability.
(c) Establish a programme to develop the product.
(d) Assign responsibility for further study of the product feasibility.

(IV) Product Development or Prototype testing:  This step consists of the following:
(a) Prototype development giving visual image of the product.
(b) Consumer testing of the model or prototype product.
(c) Branding, packing and labeling of the product.
The marketing people determine an appropriate brand name, package and price and making sure that both tangible and intangible features are considered and included. Focus groups, target market surveys and other market research techniques with the physical product give the marketer additional information.
(V) Market Testing: Test marketing involves placing a full developed new product for sale in one or more selected areas and observing its actual performance under a proposed marketing plan. In the words of P. Kotler- “Test marketing is the stage at which the product and marketing programme are introduced into more realistic market settings”. The basic purpose is to evaluate the product performance and marketing programme in a real setting prior to the commercialization. This step provides the scope of correction and modification of the product as well as marketing programme. Many products fail after commercialization because of lack of test marketing. In this process, the marketers approach the trial purchasers and first repeat purchaser to know their feelings and reaction about the product as well as marketing programme. On the basis of their opinions the marketers make certain required modification in the product as well as marketing programme. After the favourable result usually, products are sent for commercialization.
(VI) Commercialization: After favourable response in test marketing, full scale production and marketing programme are planned and then the product is launched. It may be in phased manner or the product may be introduced simultaneously depending on the company’s plan and resources available. The phased manner introduction helps to avoid short supply of the product due to initial gaps in production and distribution.

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