An appraisal of the role of New Product Development in Market Share increase in the Soft-drinks Industry

Abstract

The chapter seeks to discuss and describe the concept of product from the marketing per-spective, how companies come about new product, product development options, and the various strategies available to a company to manage new and existing products. It is a conceptual paper which reviews relevant literatures from various sources. In essence, the proposed chapter will be divided into three main sections. Section 1 will introduce the concept of product, its meaning, and core components from the marketing point of view. It will also contain discussion on the various connotations of the term product, what constitute a new product, and new product adoption. Section 2 will dwell on the options available to a company on how to come up with new products including merg-ers, acquisition, and licensing, franchising, and proactive new product development. It will also explain the two product development strategies that companies adopt in the market place. The last section will discuss the product management strategies available to a rm either from the product life cycle way or the individual product management strategies or both. At the end, conclusions and the general context of the paper are drawn.

chapter 2 literature review

Let us begin this chapter with a brief overview of the marketing process in order to have a clear understanding of marketing and its relationship with product development and man-agement. By and large, marketing practice is built upon the following process:1.  Conducting research to nd out the needs and wants of the customers.

2.  Market segmentation, targeting, and positioning.© 2018 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the CreativeCommons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use,distribution, and reproduction in any medium, provided the original work is properly cited.

3.  Developing the marketing mix program that consists of taking decision on product, price, place (distribution), and promotion.

4.  Implementation of the marketing plan and program.

5.  Control and evaluation of the marketing program.

The above process is what is usually referred to as the marketing management process which adopts the marketing concept philosophy. This is built on the notion of nding out the needs and wants of the customers before developing the products to satisfy the identied needs and wants. This goes to show that products are developed to solve any identied customers’ prob-lems and not the other way round.

1.1. Definition of Product

Product is one of the four elements of the marketing mix; the other three being price, place and promotion, which are all geared towards serving and satisfying the target market. Companies mix the product’s price, promote and distribute it to the target mar-ket. Therefore, a product is the basic element of marketing mix. The word “Product” has several meanings, but it is generally a bundle of satisfaction that customers purchase or patronize in order to solve a problem. In our day-to-day life, we use many goods, such as soap, biro, book, ball, etc.; as well as services like banking transport, healthcare, or legal services. The term product has been defined differently by various authors and authorities in the eld. For example, Harry [1] defines a product as the sum of the physical and psy-chological satisfactions the buyer receives when he makes a purchase. It is thus a tangible and/or intangible  aribute  that is  oered  to the  market  for sales.  Other  denitions of  a product include:i.  “A  product  is anything  that  can  be  oered  to a  market  for aention,  acquisition,  use, or consumption that might satisfy a want or need: it includes physical objects, services, personalities, organizations, and ideas [2].”ii.  “Product is a bundle of utilities that satisfy the customer’s needs and wants, [3].”iii.  “A product consists of the intrinsic features, extrinsic characteristics, and its intangibles associations [1]”.Thus, from the above denitions, a product can be described as anything that is capable of providing solution to a customer’s perceived problem  whether  it  is  physical  or  psy-chological. Therefore, any product that fails to provide the needed solution to a customer is a not a good product. To this end, when a student buys a biro to write test but it fails to write smoothly, it is not a good product; or when you pay for a healthcare service but get poor service in return. So, to a consumer, the product is anything, which satises his needs and wants while to a marketer, the product is a bundle of aributes that can bring returns through satisfaction of customers. It is also pertinent to note that in marketing, the concept of a product covers goods, services, ideas, people, places, and organizations except otherwise specied.Product Lifecycle Management – Terminology and Applications12

1.2. Product features

To understand the concept of a product well, it is pertinent to consider the issue of product features. These features help to give a vivid description of a product and what a buyer is really buying in a given product. The important features of product are:

1.2.1. Tangible features

A tangible product has some physical features that can be seen and handled, such as shape, size, color, weight, etc. It can be touched and its physical presence can be felt. It is made up of materials like plastic, metals, iron, or wood. Products like perfumes, jewelries, and wrist watches are sold in very aractive packages with esthetic appeals.

1.2.2. Intangible aributesThe core aspect of the product such as its performance, quality, dependability, and reliability are often built in the product or service and therefore intangible. These key aributes cannot be seen, but rather can be felt and experienced after using the product or patronizing the service. Some after-sales services, augmented services, and such pure services like tourism, story-telling, consultancy services, and counseling services fall in this category.  Here,  the organization is selling experiences or feelings.

1.2.3. Association featuresProduct may have associated aributes to facilitate its identication  and acceptance by buy-ers. Such aributes may be a brand name, package, warranty, credit terms, delivery terms, or payment options. For example, in Nigeria we have brands like Joy, Lux, Royal Foam, Engen, Tantalizers, etc., which depict positive brand associations.

1.2.4. Exchange valueFor  marketing  purposes,  every  product,  whether  tangible  or  intangible,  should  have  an exchange value and should be capable of being exchanged between buyer and seller, based on mutually agreed considerations. This exchange is a function of product value and the asking price. If the buyer feels that the value he is receiving from the product is equal or even higher than the money he is giving out, he feels satised and contented. Otherwise, he feels cheated and shortchanged and will most likely not buy it again and may even de-market the product if he gets the chance.

1.2.5. Customer satisfactionThe product should be able to satisfy consumer needs. Satisfaction can be both real and psy-chological. For example,  when  we  eat  food, wear clothes, or take  medicines;  we get a real satisfaction; whereas, when we buy insurance plan, services of travel agency, or beauty salon, we derive psychological satisfaction.Product Development and Management Strategieshttp://dx.doi.org/10.5772/intechopen.8034513

1.3. Components of a productIn product development discourse,

 marketers should understand the key components that make up any product, be it a good or service. The import of this is that it will enable compa-nies to know what to incorporate in their product in order to produce a good and acceptable product. Products have three main components; the core, tangible, and augmented services.

1.3.1. Core product

The core product constitutes the unique selling propositions of the product or service. It con-notes the key benets that a customer is looking for in a given product. Core product provides satisfaction to the customer, thereby becoming the main reason for producing and buying the product. It is an intangible aribute that is built in the product. For example, the core of a robot is performance through articial intelligence; that of aspirin is pain relief, while the core of a school is imparting knowledge.

1.3.2. Tangible product

This is  a  product  component  that can  be  seen,  touched,  and identied.  In most  cases,  it is the tangible product that makes the core product tangible and ready for repeated purchases, especially packaging, brand names, marks, or symbol and distinctive coloring. For example, the colors of Chelsea and Manchester football clubs of England are blue and red, respectively.

1.3.3. Augmented product

This is the support package that completes a total product oering such as after-sales service, warranty, delivery, and installation. At this level, the marketer prepares an augmented prod-uct that seeks to exceed customer expectations. For example, the hotel can include remote-controlled TV, 24/7 free Wi-Fi internet service, fresh ower, room service, and prompt check-in and checkout.

2. New product development

Product managers only manage the brands produced and introduced into the market. This goes to show that a company has to rst develop a product or follow any legal means to acquire a product in order to sell it to the target market. For this reason, it may not be out of place if we appraise the ways through which a company obtains a product. A company can use any of the following ways to get a product, among others.i.  Merger with other  company,  such as  the  one between Nigerian  Breweries  and  Conso-lidated Breweries, which increases the product portfolio of both companies.ii.  Acquisition of an existing company or brand, such as 7Up and Pepsi; Coca-cola and Limca as well as acquisition of Mainstreet Bank limited from Asset Management Company of Nigeria (AMCON) by Skye Bank Plc.Product Lifecycle Management – Terminology and Applications14

iii.  Licensing rights, such as Nigerian Boling company makers of Coke under license from Coca-Cola Inc. of USA.iv.  Franchising  arrangement,  like  that of  McDonalds or  Kentucky  Fried Chicken  (KFC) throughout the world.v.  Management contracting, as a system of marketing expert services such as coaching and technical advisory jobs. For  example, the job of Zidane at Real Madrid or Mourinho  of Manchester United.vi.  Leasing, a  wrien or  implied  contract  by  which  an  owner  (lessor) of  an asset  grants another party (lessee) the right to use and possess it exclusively for a specied period of time based on some conditions in return for a periodic rental payments.vii.  Hire purchase option for some specic assets.viii.  New  product  development  option  by  which the  company internally  follows certain stages to come up with a new product.Out of the aforementioned ways of obtaining a new product, the main focus of this section is to discuss the process involved in developing a new product by a company.

2.1. New product development process

New product development (NPD) is a complete process of creating and bringing a new prod-uct to market. New product development is the process of exploiting market opportunity by turning it into a product or service available for sale. A good understanding of customer needs and  wants, the  competitive  environment and  continuous  practices, and  strategies  to  beer satisfy the customer requirements and increase their market share regulate development of new products. The notion of new product needs to be explained here. By and large, the new-ness of a product depends on what the customer or target market consider as new. For this reason, a new product can be an invention (entirely new which does not exist before), innova-tion (new  to the company  but existing  in the industry),  or product  modication (changing the package, size, design and other features).

There are eight steps involved in new product development namely:i.  Idea generationii.  Idea screeningiii.  Concept development and testingiv.  Business analysisv.  Marketing strategy developmentvi.  Product developmentvii.  Test marketingviii.  CommercializationProduct Development and Management Strategies

1.  Idea generation:

It is the act of geing as many ideas as possible. Ideas for new products can be obtained from customers, sales representatives, employees, distributors, company’s research and development department, competitors, focus groups, or brainstorming. Lots of ideas are generated about the new product and out of these ideas some are implemented. Idea generation or brainstorming of new product, service, or store concepts usually begins when market opportunities are identied so as to support your idea screening phase.

2.  Idea screening:

It is the process of screening the ideas generated in order to do away with those ideas  that  are not  consistent with  the  company’s objectives and  resources. This  is with a view to eliminate ideas that are not feasible, viable, and acceptable. Many organiza-tions use dierent criteria in screening the ideas, but in general, screeners often look at the viability, feasibility, and acceptability of the ideas at hand.

3.  Concept development and testing: The ideas that pass through the screening stage are then developed into concept on paper stating clearly the marketing and engineering details of the product. In essence, the concept will indicate the target market for the prod-uct, its benets, features, and aributes as well as the planned proposed selling price for the product. Similarly, concept should contain the estimated cost of producing the product and its perceived competing brands in the chosen market. When the concept is developed, it has to be tested by asking a number of prospective customers to evaluate the idea based on its feasibility and marketability.

4.  Business analysis: This stage of the new product development process is geared toward evaluating the overall cost, sales revenue, and prot potentials of the contemplated prod-uct idea. This is achieved through such analysis as industry’s market potential, market size and growth rate, sales forecast and demand estimation, as well as the estimated prot-ability, and break-even point for the target product. The main purpose of this analysis is identifying those ideas that are apparently feasible and nancially viable. Ideas that are not viable can also be dropped at this stage.

5.  Marketing strategy development: The most viable ideas that scaled through the previous stages can be used as good candidates for marketing strategy development. In its basic form, this stage calls for formulating the product, pricing, distributing, and promotion strategies to be used in marketing the proposed products when it is introduced. It is perti-nent to note that these strategies should be exible such that it can be modied to conform to the dynamism of the environment.

6.  Product development: It is at this stage that the actual or physical prototype of the suc-cessful idea will be produced. For example, if a company is producing an auto car it will produce a car prototype-like toy car containing all the features and designs specied in the concept development stage. If it is a service, a complete service package will be developed ready for test marketing.

7.  Test marketing:

Here, the company will test the product (and its packaging) in typical usage situations by conducting focus group customer interviews, dealer research or test it at trade shows to determine customer acceptance or otherwise. The company can use the outcome of the test to make adjustments on the planned marketing strategy where necessary. However, a company has to be extra careful in test marketing its planned new Product Lifecycle Management – Terminology and Applications16

product in order not to expose it to competitors who can easily see and imitate it to come up with their own version sometimes even quicker and beer than the initiator.

8.  Commercialization:

This  is the nal stage of the development process in which the new product will be  launched  or born.  Once  it is  introduced,  it is no  longer  under the  com-pany’s control but that of the market. Here a company has to decide on when, where, and how to introduce the product. The timing of the launch is critical as it can make or mar the product’s success. For example, launching a new ice-cream during cold season is a wrong timing. The place or venue of launching should also be strategic and closer to the target market. Similarly, a company has to decide on how it can launch the product. There are two main options here namely waterfall and sprinkler approaches. In waterfall approach, a company decides to commercialize it at once in the whole market, which is, introduc-ing it to the whole Nigerian market at a go for instance. The other option is to launch it gradually from one section to another up to the time that the whole market is covered, thus using sprinkler technique. However, the choice of an option depends on the nature of the market, company’s resources and level of competition in the market.In addition, to make its commercialization successful, a company should produce and place an eective promotion to create awareness after ensuring that the products are adequately distributed throughout the market. This is because it will be counterproductive for a company to promote a product that cannot be found in the market by potential buyers.Nevertheless, it is important to note that these steps may not be followed religiously as some stages may be eliminated or done concurrently in order to reduce the time that the new prod-uct development process takes. There are two types of new product development strategies namely proactive and reactive product development strategies. Most leading companies in the industry see new product development as a proactive process, where resources are allo-cated to identify market changes and seize upon new product opportunities before they occur. Conversely, a reactive strategy is adopted by follower and strong challengers in which nothing is done until problems occur or the pioneer company introduces an innovation. And because product development process typically requires both engineering and marketing expertise, cross-functional project teams are usually formed to execute the task. The team is responsible for all aspects of the project, from initial idea generation to nal commercialization, and they usually report to senior management or project manager as the case may be. Thus, the path to develop successful new products points out three key processes that can play critical role in product development. They are talking to the customer, nurturing a project culture, and keeping it focused

The key to successful new product introduction is its acceptance by the customers and this is determined by the adoption process. Adoption process is a series of stages by which a con-sumer decides to adopt a new product or service. In today’s competitive world, a consumer is faced with a lot of choices from a number of competing products. A consumer often passes through ve stages in deciding to adopt or accept an innovation from awareness to adoption. These stages are briey explained below.

1.  Awareness: This is the step where major marketers spend a huge sum of money to create awareness about their innovation. This can be done through intensive advertising cam-paigns, aggressive selling, use of consumer and dealer sales promotion, and e-marketing communication.

2.  Information search: Following the dissemination of adequate information about the prod-uct, buyers in the market will be aware of the product and will look for more information in order to know it beer. People search for information from company adverts, dealers, sales agents, and other consumers.

3.  Evaluation: Here,  the  prospective  buyer  uses  the  information  obtained to  compare  dif-ferent product  features  and  benets  such as  price, performance,  quality,  availability, or durability. All this is an aempt to make rational decision.

4.  Trial: It is usually done on products with low unit value and higher degree of divisibility. For technical products and  other bigger assets, marketers use demonstration to enhance its trialability. This is, however, dicult in services as services are generally intangible in nature. However, service marketing managers do nd ways of oering trial packs to users, but it is easier in product marketing through sales promotional activities like giving out free samples, contests, premiums, discounts, etc.

5.  Adoption: Based on the outcome of the trial process, this is where  the  consumer  nally decides to adopt the product. It is expected that the customer will continue to buy the product repeatedly based on the satisfaction he/she derives from using the product or service. Otherwise, the process might end in rejection.

2.3. Product life cycle and its stages

Products are like human beings, they spend their life in the market. Some stay longer in the market, while others have a shorter life span. However, unlike human beings whose life is in the hands of God, the life of a product is controlled by the company and its market. It depends on whether it is adopted or rejected by the target market. Therefore, because companies know that the products they sell all have a limited lifespan, majority of them invest heavily on new product development in order to make sure that their businesses continue to grow. By and large, the product life cycle has four very clearly dened stages, each with its own character-istics

 Once a product is launched in the market, it enters into the introduction stage. This is the rst stage in an ideal product life cycle. It is characterized by high promotion and intensive distribution especially for fast moving consumer goods (FMCG). These market-ing activities often lead to increase in costs at the initial stage particularly for a company with a pioneering status which has to spend a lot to create awareness. It is at this stage that the product is formally born and it enters the competitive eld in the market. This goes to show that once in a market, the product’s life is determined by the market forces and the ability of the company to manage the product successfully in the market. Thus, if the product is accepted in the market, it will aract other competitors to the market if the market has no Product Lifecycle Management – Terminology and Applications18

or low  entry  barriers.  Otherwise,  it may  even die  at this  stage.  This  happened  with  Fanta blackcurrant soft drink brand of Nigerian Boling company makers of Coca-cola which died immediately after introduction.Growth stage: The growth stage is the next phase of the “S” shaped product life cycle. The growth here means increased sales of the product because it is widely accepted by the target market. As the sales rise, the market will also grow and revenues will now upset the initial cost of developing and launching the product resulting to prot generation. To maintain the growth momentum, a company has to emphasize brand preference in its promotion rather than brand awareness.Maturity stage: When sales stabilize and market is saturated the maturity stage sets in. This is probably the most competitive time for most products and businesses. Companies here need to consider the strategy of product modications, market expansion, or marketing mix modication, which might give them a competitive advantage. The aim here is to get more customers for the product. Organizations usually like to maintain their products in this stage in order to enjoy the cash inows from the market, but it is very dicult to manage.Decline stage: This stage is characterized by steady decrease in sales and prot in the mar-ket. This may be because the product has lost its appeal with the customers or presence of beer products in the market or the product becomes obsolete, and therefore needs further improvements. Companies do not like this stage because of its adverse consequences and will do everything possible to avoid it. However, for some products this  stage  is  inevitable,  and as a result, measures should be put in place to either resuscitate the product or phase it out of the market. In general, the main objective of the product life cycle stages is to enable product managers to know how they can enhance the performance of the products within the context of the company’s business strategies