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New Product failures

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History shows that new products success rate in the market is low due to various reasons. The presentation looks at innovation , new product development process , reasons of failure with examples and also proposes a framework for improving the success rate

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New Product failures

  1. 1. New Product DevelopmentWhy do New Products fail? By Gopaldas Pawan Kumar BE, MBA, MSc (EBM),Warwick
  2. 2. Innovation vis-à-vis New Product(NP) • Innovation drives NP introduction into markets. • Innovation represent a total package of features, forms and functions which marketing program converts into benefits for satisfying the needs and wants of the customer. • Continuous innovations represent minor modifications to existing products, whereas, discontinuous innovations help introduce new products that may change the market and consumer lifestyles and in some cases, rendering existing technologies obsolete. - Kahn ( 2008)
  3. 3. What is a Product ?  Anything that can be offered to a market to satisfy a want or need which may include physical goods, services, experiences, events, persons, places, properties, organizations, information and ideas. -Kotler et al (2013)
  4. 4. New Product (NP)  Any product that users consider as a new addition to the current market offerings qualifies as a new product with newness implying change and absence of consumer experience- Pessemier (1986) Organizations need to replace existing products by NP’s to be competitive in the market. NP’s help in garnering higher margins and hence have a big role to play in growth and survival of an Organization.
  5. 5. New Product could be made available by • Reduction in Cost. • Product Improvements to improve form or function • Line Extensions which are copies of existing product with unique features. • Market Extensions which are original products positioned differently in new markets. • New Category products which are new to the company but not new to the customers. • New-to-the world products which are technological innovations that create new market that did not exist earlier.
  6. 6. New Product Classification New Product are copies of existing product with unique features Cost Improvement Product Improvements By Cost Optimization Figure-1 original products positioned differently in new markets Line Extension Market Extension To improve form and functions. New Category Products new to the company but not new to the customers New-to –theWorld Products technological innovations that create new market that did not exist earlier.
  7. 7. New Product Development(NPD) Process Involves 1. Idea generation. 2. Idea screening. 3. Concept development and testing. 4. Marketing strategy development. 5. Business Analysis. 6. Product development. 7. Market testing 8. Commercialization. The seeds of failure are sown at the initial stages of development . Using a stage gate method, the NPD process could be developed to reduce failures. Faster feedback and prompt corrective actions could improve success rate.
  8. 8. NPD Decision Process Figure- 2 Source: Kotler et al , “Marketing Management” , Dorling Kindersley (I) Pvt Ltd.,2013
  9. 9. An NP is declared a failure When 1. It is withdrawn from the market for any reason. 2. The required market share in a desired time period is not realized. 3. The anticipated life cycle as defined by the organization is not achieved and 4. The desired profitability is not realized. -Berry (2013)
  10. 10. Why New Products Fail? Reasons could be any one or more than one of the following 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. The product was not new to the customer /market. The product offered no tangible benefit. The product was not positioned properly. Poor support from channel partners. High forecast variance . Strong competitors’ response . Change in customers preferences Environmental constraints. Poor after sales service. Inadequate return on investment . Lack of coordination among various departments . Poor diffusion of innovation . Conflict of personalities at higher echelons. Urban & Hauser(1993)
  11. 11. Other Reasons 1. NP not meeting the claims made or creating a new category product necessitating customer education (Schneider and Hall , 2011). 2. Lack of product distinctiveness, (Wheelwright and Sasser ,1989) 3. High research and/or product development costs and ignoring marketing research findings (Berry 2013), 4. Consumers not being informed of the applications, and new technologies not addressing market opportunity correctly ( Moote ,2012)
  12. 12. Examples of New Product Failures Ford Edsel Betamax Global Products Indian Products Tata Nano Tata Estate Laser Disc (Failures due to wrong positioning) Bajaj Geared Scooter Figure -3 2- Stroke Bikes (Failures due to new technology)
  13. 13. The OEEM Framework In order to increase the rate of success of NP’s , the author proposes a framework called OEEM, which is an acronym for 1. Organizational Excellence. 2. Execution Skills. 3. External Factors. 4. Marketing Mix Strategy. Each pillar is made up of various activities which form the bricks of the structure.
  14. 14. OEEM Framework- Details Critical factors to consider for success of New Product Organisational Excellence Execution Skills External Factors • Constant environmental Mapping • Professional Management • Strong NPD Process • Strong R&D • CFT's for NPD's • Multi -skilled employees • Collaborative departments • Customer -Centric • Strong Project execution skills • Risk taking • First-time-right motto • Innovative • Speed in development • Technology seeker • Adequate resources Marketing Mix Strategy • Minimal time from conception to launch • Product uniqueness • Large Market Size • Growing Economy • Stable Market • Tab on Competition • Vigil for opportunities • Responsible suppliers • Strong network of suppliers • Right Price • Knowledgable Channel Partners. • Value for Money products. • Ease of usage/application • Service excellence • Effective segmentation • Product differentiation • Strong grounding inTQM and Six Sigma • Emphasis on cost reduction • Excellent planning skills • Access to raw materials • Fast ramp up of production • Flexible and adaptable manufacturing • Knowledgeable customer • Strong base in forecasting techniques • Effective Supply Chain Management . • Conducive business atmosphere • Effective positioning of NP's • Proactive Government • Integrated marketing communications • Quality oriented. • Excellent PR • Regular Training & Development Programmes. • Strong Brand equity • Bench marking Figure - 4 The OEEM Framework by Pawan, Gopaldas , 2013
  15. 15. References Berry ,Tim ,” Product and Brand Failures : A Marketing Perspective” Bplans.com ,2010 http://www.mplans.com/articles/product-and-brand-failures-a-marketing-perspective/ Kahn ,B Kenneth, ”New Product Planning”,Response Books, New Delhi, 110044, 2008. Kotler,Philip,Keller ,Kevin Lane , Koshy , Abram and Jha Mithileshwar, “Marketing Management”,DorlingKinderslay(I)Pvt Ltd, Licencee Pearson Education,Inc,2013, Page 291 .Mootee, Idris , “10 Big Reasons Why Most Innovative Products & Services Fail” ,www.innovationexcellence.com 22.08.2012 ,http://www.innovationexcellence.com/blog/2012/08/22/10-big-reasons-why-most-innovativeproducts-services-fail/21.11.13 Pessemier , Edgar A; “Product Management”, Robert E . Kreiger Publishing Company, Florida USA,1986, Schneider and Hall Julie , Joan, “Why Product Launches Fail” , hbr.org/2011/04 http://hbr.org/2011/04/why-most-product-launches-fail/ Wheelwright, Steven C. and Sasser, Jr. W. Earl ,” The New Product Development Map “ , Harvard Business Review, May 1989 http://hbr.org/1989/05/the-new-product-development-map/ar/pr 03.12.13
  16. 16. The End