Business Analysis

Business Analysis

The fifth stage of the NPD process is business analysis. This is where it is decided whether the product is actually technically feasible, whether the product has potential within the market and whether the product will create a genuine financial contribution (Tzokas et al. 2004).

        Kotler & Armstrong (2012) suggest that business analysis reviews certain key elements to ensure the NPD process can be ran effectively:

• Demand Projections - How the product sells in terms of the set price (elasticity of demand); the speed of the sales i.e. if the product is seasonal then determining the peak sales times and also how often the product will repurchased.

• Cost Projections - Analysing total costs alongside per unit costs; the start-up costs for a business alongside the on-going running costs; if the business can gain economies of scale leading to decreased costs and also considerations of the products’ break-even point. McDaniel et al. (2011) suggest that cost projections are essential because costs significantly rise once the product enters the product development phase.

• Competition – SWOT analysis of closest competitors and how an organisation’s product will differentiate in comparison to a competitor

• Investment required – Planning how much money will be needed for engineering, patent, development, testing and all promotional and distributional activities.

• Profitability – How long until the product will turn a profit; determining what the return on investment will be. A risk assessment should also be undertaken.

This was seen in ‘RA Concepts’ – a golf club manufacturer – in their business plan in
2012.  They took into account their competition within the golf club industry to construct forecast plans in regards to costs, demands and the required investment amount. The organisation drawn up forecasts on projected market share of the industry within its first 5 years; 2% projections for the American female market, 1.5% male and 0.5% juniors. Their price projections state that price will increase on an annual basis, allowing them to draw-up a sales forecast (Appendix A) (RA Concepts, 2012).

This is also seen in David Lloyd gym. Their aim is to deliver results to their stakeholders; therefore they research to determine projections on price, costs and demand. This has allowed them to become the UK’s market leader Health and fitness club provision (Customer Insight, 2011).

Regarding the Cricket Spike idea that has matured throughout the NPD process, business analysis has been undertaken. Demand projections shown that – due to the price being set relatively close to competitors prices – it will be extremely high when the product first comes to market. Demand will peak in January and April, when the winter training and summer playing season respectively begin. Analysis of costs, competitor’s action and the need for investment has allowed a cash flow forecast for Year 1 to be drawn up (Appendix B). This shows the product breaking even after 12 months, an ambitious but highly achievable projection.. After business analysis in regards to the cricket spike idea, it has therefore allowed the product to enhance further through the NPD process.

Word Count 497.

Appendices

Appendix A

Appendix B

Reference List

Customer Insight. (2011) Case study – David Lloyd leisure. Available at: http://www.customer-insight.co.uk/article/936 Last accessed 9th December 2013.

Kotler, P., & Armstrong, G. (2012) Principles of Marketing. 14th Edition. London: Pearson Education.

McDaniel, C. D., Lamb, C. W., & Hair, J. F. (2011) Introduction to marketing. 11th Edition. Ohio: South Western Cengage Learning.

RA Concepts, (2012) Golf Club Manufacturer Business Plan. Available at: http://www.bplans.com/golf_club_manufacturer_business_plan/executive_summary_fc.php#.UMYeioPtTwY Last accessed 9th December 2013.

Tzokas, N. Hultink. E& Hart, S. (2004). Navigating the new product development process. Industrial Marketing Management. 33 (7), pp. 619–626.

Marketing Strategy & Development

The fourth stage of the NPD process is marketing strategy and development. A marketing strategy is an organisation’s approach plan– long term or short term –to achieve its marketing objectives (Shankar et al., 2012). Kotler & Keller (2012) further state that a marketing strategy considers certain key elements:

. Target Market – In relation to how big the target market is, the structure of the market and the buying behaviours of the target market. The positioning of the product within potential consumers is also critical for a successful marketing strategy.

. Product – In terms of pricing, how the product will be distributed, how it will be promoted and the product’s positioning within its potential customers.

. Goals – The long term profit and sales goals in comparison with organisation’s projections over time. An organisation should also consider elements of the marketing mix when thinking of their long term goals and objectives.

            Barclay et al., (2012) suggest product development is the modification and enhancement of a new product idea’s characteristics in order to maximise benefits to a potential buyer. Synthany (2013) shown (Appendix A) their own new product development life cycle. This suggests the need for prototypes to be developed, allowing an organisation to then see the product’s manufacturing workability in order to then further develop the product.

          When a new golf GPS app- iGolf –was released, there was a significant marketing strategy that covered all of Kotler & Keller’s (2012) key elements. Their target market was golfers that owned a phone with built-in GPS systems in the US– a market approximately of 3.58 million people with a potential for growth as forecasts predict. The company that produced this app– L1 –aim to position themselves as producers of affordable, high-quality goods. This allowed them to gain significant market share over their less established competitors. iGolf was positioned as a premium, high-quality product, therefore making it affordable due to it’s significantly higher prices. Distribution was via electronic downloading and promotion occurred through social media, newsletters, websites, PR, merchandise shows and co-brandings. L1’s sales strategy of iGolf was to gain acceptance and allowance of all major US wireless companies for the distribution of the app through the app store.  Negotiations also took place with mobile network providers to include the app within their service plans. Free trials and customer service for the app were also induced as L1’s sales promotion technique (L1 Technologies Inc, No date stated).

          In regards to the cricket spike idea that has came through the previous phases of the NPD process, a relevant marketing strategy & development has been incorporated. Seen in Appendix B, the marketing strategy for the cricket spike idea incorporates all the elements of Kotler & Keller’s (2012) breakdown of marketing strategy.

  Development of the product has been seen through the production of prototypes which give a basic reflection as to the feasibility of the manufacturing process. This will therefore allow scope for the product to further enhance through the New Product Development process.

Word Count 496.

Appendices

Appendix A

 
Appendix B 

ELEMENT CRICKET SPIKE IDEA

TARGET MARKET Cricketers who train both indoors and outdoors throughout the year in the UK. Market size is roughly around 500,000 people (ECB, 2013) with that figure expected to grow due to the increasing popularity of 20/20 and The Ashes.

POSITIONING Medium-quality, extremely affordable, niche market product. As the product is new to market, the price would therefore be lower than existing spiked cricket shoes (Appendix C).

DISTRIBUTION The product will be distributed through external sources in major sports equipment shops in-store and online. The major shops to sell this product will be Sports Direct, Pro-Direct Cricket and CricketSupplies.com.

SALES PROMOTION This will occur through free trial runs of the cricket spike at selected county cricket clubs throughout the UK in which anyone can attend. This will also occur at the major cricket-playing universities throughout the UK. Advertisements through university newsletters and popular online cricket forums.

LONG RUN SALES STRATEGY As the cricket spike will be an infrequently purchased product (Appendix D), new customers will always need to be found to generate increasing sales. Therefore, the long-run sales strategy for the product is to break into the international market online and in international cricket stores. To increase the market share of the product, the aim is to get the product endorsed by 5 different international cricketers after the first 2 years, therefore allowing for increased prices due to the projected increase in demand.

Appendix C 

Appendix D

                                                                  Product Life Cycle Sales (Kotler & Keller, 2012) 

Reference List 

Barclay, I., Dann, Z., & Holroyd, P. (2012) New Product Development. Oxford: Heinemann.

ECB. (2013) Question and answers. Available at: http://www.ecb.co.uk/twelfthman/interactive/q-and-a/2841,2841,QA.html Last accessed 4th December 2013.

Kotler, P., & Keller, K. (2012) Marketing Management. Essex: Pearson Education. pp54-80.

L1 Technologies Inc. (No date stated) iGolf Marketing Plan. San Diego.

Shankar, V., Carpenter, G. S., Farley, J., & Hamilton, B. A. (2012) Handbook of marketing strategy. Cheltenham: Edward Elgar.

Synthany. (2013) Our Products. Available at: http://synanthysolutions.com/products.html# Last accessed 3rd December 2013.

Concept Development & Testing

Concept Development and Testing

The third stage of the NPD process is concept development and testing. Concept development is the ongoing, continuous approach of finding the most appropriate design for a new product. Multiple designs consist of different materials, technology and physical appearance in order to grasp what the key product elements are so that the most premium product can be brought to market (Armstrong et. al. 2009).  

Lamb et al. (2010) described concept testing has been described within concept development as the preliminary stage to evaluate and test the success of a new product before it is actually brought to market. The concept is presented to a potential customer through an image, a statement or a verbal description. The sports product, brand and category are also considered at this stage of the NPD process. Many questions are asked;

. Is there need for the product?

. Is there a gap in the market for the product?

. What are the benefits of this product in relation to that of a competitor?

. What is the perceived value of the product?

. What are the customers’ purchase intentions in relation to the occasion and frequency of the purchase?

This stage is crucial in the development of a new (sports) product.

            Concept development and testing is also seen within the sport industry when a new sports product is being brought to market. Nike implements CD&T when bringing a new footwear product to market. They gather a mixed group of dedicated athletes from a variety of different sports to give constructive feedback and criticism on the shoes they are testing. This is in order to produce only the finest, most desirable to bring to the sports footwear market (Nike 2013).  Also within the sport industry, The Human Performance Centre at London South Bank University wanted to bring their concept ‘youbreathe’ – a vibration-training device for the respiratory system. As their market is broad – from athletes to asthma sufferers – they had to apply concept development and testing in order to develop the most appropriate, customer-fitting product (LSBU, 2013).  

            In regards to the Cricket Spike idea that was brought through from the idea generation and screening phase, concept developments were created in order to test on the potential customers of the product. Three possible concepts of this are:

1)       Cricket trainer with a button on the sole that folds and unfolds the spike so that the athlete can have either a spiked trainer or general trainer.

2)      Cricket trainer with reeling system on the sole that folds and unfold the spike so that the athlete can have either a spiked trainer or general trainer.

3)      Cricket trainer with detachable spikes that can be taken off or put on by using a spike-remover device; allowing an athlete to have either a spike trainer or general trainer.

A concept scoring matrix was created after the concepts were tested by potential customers. This matrix discovered that concept 1 has the highest potential for success in the sport cricket marketplace.

	CONCEPT 1	CONCEPT 2	CONCEPT 3
EASE OF USE	5	2	3
TARGET MARKET (Size)	4	4	4
LOW NUMBER OF COMPETITORS	4	4	3
ENHANCING THE CRICKET SHOE MARKET	5	3	3
DEMAND	4	3	4
POTENTIAL PRODUCT GROWTH	5	2	3
TOTAL SCORE	27	18	20
RANK	1	2	3

N.B. 1 – Low, 5 – High.        

Word Count - 500.  

Reference List

Armstrong, G., Kotler, P., Harker, M., & Brennan, R. (2009) Marketing: an introduction. Essex: Pearson Education.

Lamb, C. W., Hair Jr, J. F., & McDaniel, C. D. (2010) Essentials of marketing. Ohio: Cengage Learning.

London South Bank University (2013) Product testing and development. Available at: http://www1.lsbu.ac.uk/sports/hpc/technology.shtml Last accessed 25th November 2013.

Nike. (2013) Consumer affairs. Testing products for Nike. Available at: http://help-us.nikeinc.com/app/answers/detail/a_id/530 Last accessed 25th November 2013.

           

 

Idea Screening

Idea Screening

The Business Dictionary (2012) state that idea screening is simply analysing and evaluating innovative product ideas and their surrounding market(s).

          Hooker & Monas (2008) described idea screening as the process that determines whether to further develop a suggested innovative product. The general concept of the process is to decide if a product is actually viable and to establish the profitability – if any – of the product. Once evaluated, if a product is deemed unfeasible, then it will be eliminated from enhancing and therefore, developing any further in the NPD process.

          When a suggested idea reaches the screening phase, businesses have to undertake market research; questions are asked to the organisation’s target market, for example; whether the customer would benefit from the product, whether the customer would buy the product and also how much they would be willing to pay for the product. Additionally, businesses will evaluate the idea by looking at the potential product life cycle and peak sale times, i.e. if the product is highly seasonal. Another consideration businesses use is the Ansoff Matrix. This is in order to determine where the product lies in terms of its market (Hüllsmann & Pfeffermann, 2011).

          The Decision Making Matrix is another tool used by organisations to ask questions and break down ideas in order to assess their feasibility; potential customers give answers about concepts surrounding the product idea (ASQ, 2004). This matrix is essential in the process of idea screening.

          Nike’s manufacturing vision is ‘to create and to deliver great products through a sustainable, Nike, Inc.-wide sourcing base’. As they will only use recycled or organic materials to manufacture their products - when undergoing idea screening - they only choose to develop those that use the lowest number of toxic chemicals. Nike is one of the biggest sport companies in the world; every product they produce will have endured screening. Their products have gone on to make Nike a net profit of over £500million per-annum (Nike, 2013). Hence, proving how important idea screening is when developing new products.

          In relation to the ideas placed forward in the idea generation blog, the decision-making matrix was completed in order to discover which idea would be worthwhile to take forward to the next phase of NPD (Appendix A). Results show that the Cricket Spike idea was the strongest product due to the consistent high scoring. However, it was also proven that the golf ball idea was not feasible for a number of reasons. From this, structure should be developing within the cricket spike idea; e.g. the product will benefit the cricket market via introducing new technology that resolves a cost-based problem, therefore the product has serious potential across the sport industry if it were diversified correctly.

          To summarise, the decision-making matrix is a key concept to consider when deciding which ideas to take to the next phase of the NPD process. Idea screening plays an essential role in the NPD process and without it; the most feasible, suitable products would not be brought to market.

Appendix A

Reference List

ASQ (2004) Decision Matrix. Available at: http://asq.org/learn-about-quality/decision-making-tools/overview/decision-matrix.html Last accessed 18/11/13.

Business Dictionary (2012) Idea Screening definition. Available at: http://www.businessdictionary.com/definition/idea-screening.html Last accessed 18/11/13.

Hooker, R. & Monas, S. (2008) Shoestring Venture: The Start-Up Bible. New York: Bloomington. p189.

Hüllsmann, M. & Pfeffermann. (2001) Strategies and communications for innovations. Heidelberg: Springer.
Nike, Inc. (2013) Designing Products. Available at: http://nikeinc.com/pages/products Last accessed 18/11/13.