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Marketing Basics - Kotler Philip

New Product Development Strategy

Given the rapid changes in tastes, technology and competition, a firm cannot rely solely on existing products. The consumer wants and is waiting for new and improved products. And competitors will make every effort to provide it with these new products. Therefore, each company should have its own program for the development of new products.

A company can get new items in two ways. Firstly, through acquisition from the outside, i.e. having bought a whole company, patent or license for the production of another's goods. And secondly, thanks to their own efforts, i.e. creating a research and development department.

Let us dwell on the process of developing new products. By "new products" we mean original products, improved options or modifications to existing products, as well as new brands of R&D products of the manufacturer. At the same time, we will consider the question of whether the consumer considers the product newly offered to him a novelty.

Innovation can be quite risky. In its ill-fated Edsel model, Ford lost, according to experts, about $ 350 million (see Box 20). The Dupont Corporation cost about $ 100 million to fail with its synthetic leather, Corfu (see the heading to Chapter 5). A catastrophe turned out to be an attempt by Xerox to enter the computer market. The investment in the creation of the Concord French airliner will never be paid off. In the market of packaged consumer goods, the novelties of such sophisticated firms as Campbell, Gillette, Lever Brothers, General Foods, Bristol-Myers and others have repeatedly failed.

According to one study, 40% of all new products on the consumer market fail, 20 on the industrial market, and 18% 2 on the services market. The level of failure of new consumer goods is particularly alarming.

Why do new things fail? There are several reasons for this. A senior manager can “push through” an idea sweet to his heart, despite the negative results of the marketing research. In another case, the idea itself was good, but the market volume was clearly overestimated. It may turn out that the product in its actual design is not designed as it should. And perhaps he was positioned incorrectly in the market, unsuccessfully advertised, or set an excessively high price on him. In some cases, the cost of developing a product is much higher than estimated, and sometimes competitors retaliation is stronger than expected.

Thus, the company faces a dilemma: on the one hand, it is necessary to develop new products, and on the other, there are not so many chances for the success of new products. Part of the answer lies in purposefully orienting the company, organizationally adapting it to work with new products. In addition, groups of specialists who create new products must carefully work out each stage of creating new products. The main stages of this process are presented in Fig. 54 and are described below.

The main stages of the development of new products

Fig. 54. The main stages of development of new products

Box 20. One of the most expensive commodity failures of all time is the Ford Ezzel.

One of the most expensive commodity failures of all time is the Ford Ezel, launched on the market in 1957. Already in the early 1950s, Ford began to feel the need to replenish its product range with a new model. In those years, Ford and Chevrolet cars accounted for 25% of the automobile market. But there was one difference. With increasing wealth, owners of Chevrolet cars manufactured by General Motors have risen to the level of owners of models such as Pontiac, Buick and Oldsmobile, produced by the same General Motors. The wealthy Ford owners when buying more expensive cars also preferred the Pontiac, Buick and Oldsmobile models. They did not like the more expensive model of the Ford company, Mercury, and the elegant Ford Lincoln could not afford.

It was necessary to create a middle-class car of value, attractive to the prosperous owners of ordinary Ford and Chevrolet cars. A marketing study conducted by Ford showed that representatives of a numerically growing middle class are ready to buy higher-quality cars. Having studied the demographic characteristics, desires and preferences of car owners, Ford began to create a model that would attract these customers. The design features of the novelty were kept secret, although the company constantly distributed propaganda materials, trying to increase public interest in the imminent appearance of a new, unique car. Regardless of the huge costs, the company decided to organize the sale of the Ezel model through a separate dealer network. "Ezel" was to be sold only by dealers who were granted the exclusive right to do this. When choosing a name for the model, the company considered 6,000 names, including a number proposed by the poetess Marianne Moore. Rejecting them all, the company named the car "Ezel" in honor of Henry Ford's only son.

The Ezel model was launched to the market with great fanfare on September 4, 1957. In one day, it was possible to sell and receive orders for 65 thousand cars. It was a day of triumph, but the only day. Despite the fact that more than two and a half million people have visited the salons to see the new product, few have bought it. By January 1958, the company liquidated a network of dealers with the exclusive right to sell the Ezel model and at the same time set up a new production unit, Mercury-Ezel-Lincoln. In November 1959, the Ezel model was discontinued.

Why did the Ezel fail? Firstly, many consumers simply did not like the car. The front of the car was built vertically, and the rear - horizontally, as if different groups of designers worked on opposite ends of the car. Moreover, the rather strange appearance of the radiator grill gave rise to many jokes with a Freudian bias. Secondly, Ford touted Ezzel as a new type of car. However, consumers did not see the novelty in it. For them, he became just another mid-range car of value. So the company was the victim of its own excessive promises. Thirdly, in a hurry to release a new car, the Ford company eased attention to quality control, and many Ezels found themselves in a marriage.

The time of exit with the car to the market was also unsuccessful. Ezel appeared in 1957, when a deep recession was just emerging in the economy. People needed cheaper cars, and they started buying Volkswagen and the Rambler model of American Motors. The public reacted sharply negatively to the pretentious Ezel cars sparkling with chrome. But, according to the results of preliminary studies, nothing portended either impending changes in the economy or changes in consumer preferences. "Ezel" fell victim to imperfect planning and poor timing. All of this cost Ford 350 million dollars in losses.