New Products are Critical for Growth IRI analysis of 240 product categories (92-94) Examination of the 164 products with 3+ point increase in dollar share Reasons for growth: New Product Initiative 80.5% •New Brand/New Category 29.5 •New brand/Old Categories 8.0 •Line extension 17.5 •New items 25.5
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New Products are Critical for Growth IRI analysis of 240 product categories (92-94) Examination of the 164 products with 3+ point increase in dollar share.
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New Products are Critical for Growth
IRI analysis of 240 product categories (92-94)Examination of the 164 products with 3+ point increase in dollar share
Other Marketing Programs 19.5%•Re-stage 4.7•Increase Distribution 5.4•Other 9.4
Most new product fail
72 % of new product introductions fail
Based on analysis of all 1992 introductions from the top leading national advertisers (P&G, Pepsico, Nestle, Kellogg, Warner Lambert, Phillip Morris, J&J, Grand Met, Sterling)
Most Companies Lose Money on New Products
Launch 10 new products @ $15 MM = $150 Millions
Expected 2.25 to be winners @ $50 MMcontribution over 3 years = $113 Millions
Net loss = $37
Assunption: Sales > $25MM =>50 MM contribution over three years
0,00%
20,00%
40,00%
60,00%
80,00%
100,00%
Under 25 25-50 50-100 100-200 200+
Very Few Brands are “Mega” Succeses
2 Year Sales $ Millions
Source:IRI New Product Success Story
Issues for this Section
•What is a product
•Why to innovate and How to do it
•What is a brand and How it can be managed
What is a product?
Core product
Actualproduct
Augmented product
What is a product line ?
A product line is a group of products that are closely related because they perform a similar function, are sold to the same customer groups, are marketed through the same channels, or make up a particular product range
• Reach the market first• Preannounce the new product before market availability• Innovate constantly• Occupy the market –multiple brands, positionings, segments, and alliances
Innovate Constantly
737 747 757 767 777
Ava
nzam
enti
600
400
300 300
100
The Boeing Product Line
Migrations
Decision model for Determining Response to a New Entrant
How Aggressive Should the Response
Be?
Is a Response Appropriate?
Ignore no
si
Accomodate the New Entrant
Abbandon the Market
Retaliate in the Same Product Market
What should be the domain of the Response?
Respond in theSame Product Market
Respond in a Different ProductMarket
What marketing initiative should be taken?
When to Enter?
Pioneer Followers
- Consumer learning Free raiding- Switching costs Minore incertezza- Access to customers- Experience effect- Preemption of scarse resources
Minesota vs P&G StarbucksIBM
Product Life cycle
Phases:-Introduction-Growth -Maturity-Decline
Product category, product form, branded product
Introduction stage
• Product Innovation• Skimming vs. Penetration stage• Level of marketing expenditures• Preannouncement• Alliances
Growth stage
• Process innovation• New market segments• New Distribution channels• Price decline
Market awareness of new products over time
100%
Launch Time
When to Eliminate a Product?
NeXT desktop computers.
Introduced in 1988, the product was shipped until 1993 despitePoor market performace.
Over this period NeXT eroded $ 200 Million in investment funds.
Brands are the heart of marketing
• They make things different
• They reduce price sensitivity
Bottom line: If consumers perceive a brand as superior, then they will prefer it and pay more for it
How to brand a product?
Tide, Bold, Daz ; Go, BAIndividual
Kellogg, KraftOverall Family
Ajax, Colgate-PalmoliveLine Family
Kit Kat Ice creamBrand Extensions
How to create successful brands?
• Prioritise quality• Being first• Unique positioning concept • Strong communication programme• Time and consistency
What Have we Learnt ?
• Innovation and New Product Development is critical for growth