New product development

New product development that coordinates efforts across national markets leads to better products and services, but companies develop products in different countries in markedly different ways.

Japanese companies, for example, tend to believe much more in getting new products to market and then gauging the reaction to them. the product itself may have been developed with reference to observations of present and potential customers rather than conventional market research. US companies on the other hand, tend to use more formal market research methods. And for German companies, product development schedules tend to be more important. Clearly, companies decide on different launch strategies for different categories of products. Toshiba launched the Digital Video Disc (DVD) in Japan in November 1996, in the US in March 1997 and in Europe in autumn 1997. However Intel launched its latest PC chips simultaneously in all countries.

The launch decision also includes marketing mix decisions. When Citibank introduced its credit card in the Asia-Pacific region, it launched it sequentially and tailored the product features for each country while maintaining its premium positioning. The promotional, pricing and distribution strategies also differed from country to country. The introduction of the Internet and Intranets has the potential to accelerate the process of mining all markets for relevant information and for features that can be included in new products. Numerous companies investigate the possibilities of melding product ideas arising from different countries.

Both Marks and Spencer, by selling underwear and pensions, and Virgin, with flights to New York and cans of cola, have seized opportunities for extending their brand names into new areas. But if you stretch a brand too far, the name becomes devalued, as some companies have found to their cost. Brand extension has become valuable in the past five years. During the recession, hard-pressed marketing directors in the food industry offered consumers more choice by adding new flavors, taking out fat or sugar, or moving from one tried and tested category, such as confectionary, to an allied one such as soft drinks. It was a low-risk strategy - it avoided the huge costs of new product development and offered variation on an existing purchase.

Instead of building its own new products, a company can buy another company and its established brands. In the past years we have seen a dramatic flurry of one big company gobbling up another (Nestle absorbed Rowntree Makintosh, Philip Morris obtained General Foods, Pfizer acquired Pharmacia Corporation, etc.) Such acquisitions can be tricky - the company must be certain that the acquired products blend with its current products and that the firm has the skills and resources needed to continue to run the acquired brands profitably.

In recent years, many companies have used "me-too" product strategies - introducing imitations of successful competing products. Thus Tandy, Sanyo, Compaq and many others produce IBM-compatible personal computers. These "clones" sometimes sell for les than half the price of yhr IBM models they emulate. Imitation is now fair play for products ranging from soft drinks to toiletries. Me-too products are often quicker and less expensive to develop. But the imitating company enters the market late and must battle a successful, firmly entrenched competitor.

Many companies turn to reviving oce-succesful brands that are now dead or dying. Reformulating, repositioning an old brand can cost much less than creating new brands. Thus Danone yogurt sales rocketed as a result of linking it to healthy living; Coca-Cola rejuvenated Fresca by adding NutraSweet and real fruit juices.

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