There are eight stages in the new-product development process. Should companies always use all steps in sequence, or can some be deleted or overlapped to speed the development process? Provide reasons to support your answer.
New product generation has eight main stages: idea generation, idea screening, concept development, marketing strategy, business analysis, product development, test marketing and commercialization (Kotler & Armstrong 2010). Ideas are generated either within the company or from competitors and customers. Once an idea has been generated, it has to be screened to ensure it is feasible and workable.
The concept can then be developed further by taking it to a test audience and checking how they respond to it. If they are satisfied or excited about how the concept sounds, it can be moved to the marketing stage. The company must establish how the product will be marketed, how the market will be segmented and position strategies. If the marketing strategy is sound, the business should then establish the feasibility of the new product.
This involves checking if the product is profitable in the long run. After all these stages are satisfactorily passed, a prototype of the product is then developed and presented to a target audience. Marketing the product to a target audience is the test marketing stage. Test marketing is beneficial because it provides feedback according to which the product may be improved. Finally, it is launched on a national/regional scale, depending on the marketing strategy selected (Subramaniam 2009).
It is obvious that all these stages of new product development are dependent on each other, and everything is working to form a strong product. When a company is launching a new product, it would be advisable to follow all the steps sequentially. However, this is not entirely necessary. If, for example, a beer selling company needs to launch a new flavour of its product, it will take a shorter time – or probably skip – the marketing strategy process and jump straight into the business analysis.
This is because it has already established a marketing strategy that works for other brands of the company, and only requires changing its strategy slightly to suit the new product. However, for companies that want to build an entirely new product that has never been tested in any market before, it is essential to follow each step and take the required time needed to develop the product fully.
How many beer flavours you think a beer manufacturer should offer?
To recommend that a company should market a number of beer flavours are foolhardy. There are certain factors that affect the number of products a company can produce, and each must be considered when making the decision to market one product over another. The main factors to be considered in this answer are the total annual capacity and market segmentation.
Total annual capacity refers to the number of finished products a company can produce in one calendar year (Answers.com 2011). The capacity of a company to produce is limited by plant capacity and cost of production. If a company’s manufacturing plants are able to produce a certain number of finished products, this number may be increased by building more manufacturing plants, using the available resources more efficiently and producing certain products at a time. In addition, the company should be able to meet the cost of producing all its products. Certain companies have been known to consider stopping the production of a specific brand if the cost of producing it is not sustainable (Timken 2011).
If a company has been found to have the capacity to produce enough products to suit its needs, then market segments are what would guide a company’s number of brands. The beer market, for example, is unique. According to Hall (2007), there are two main types of beer: lager and ale. The main difference between the two is the temperature at which they are fermented. Ale is fermented at a higher temperature (650 – 750 F) than lager, which ferments at between 460 and 550 F.
The other factor that distinguishes these two is the type of yeast used in the fermentation process. Top-fermenting yeast is used in the manufacture of ale, while bottom-fermenting yeast is used in the manufacture of lagers. Beers can then be flavoured to differ in taste, colour and thickness, once these distinctions have been made. Market segmentation guides a company to how many flavours it can produce. If a company, for example, chooses to segment its market demographically, then it may choose to produce a certain number of flavours for younger people, for adults, for men, for women and any other segment it may choose to form.
There is a handful of very large beer producers in Australia, plus numerous imported beers. What are the main beer brands in your local region? How can a small micro-brewery such as Five Island s compete in such a marketplace?
There are hundreds of beer brands in New South Wales, some are big, and some are small. The leading beer brands in the New South Wales region are KB Lager, Tooheys, Reschs, James Squire and Hahn. KB Lager is manufactured by Tooth and Co., an Australian company. Tooheys is produced under the Tooheys and Hahn trademarks which are parts of the Lion Nathan beverages group, a New Zealand company. Resch’s is produced by Carlton and United Breweries, which was taken over by Tooth and Co., the Australian company. James Squire is produced by the Malt Shovel Brewery, an Australian brewery. Hahn Premium and Hahn Premium Light are products of Hahn Brewery, located in the New South Wales, Australia.
It is difficult, therefore, for micro-companies like Five Islands to compete in such a market, which is dominated by local and international brands. One of the most effective and well-tested strategies used by small companies in the development of a niche market.
A niche market refers to a company’s core business (Beijerse, 2000). Most companies have a niche market within which they operate. Without these niche markets, it is impossible for a small company to operate and survive in such a saturated marketplace. Certain companies have specialized in working in partnership with larger companies. They use large company’s systems which are dependent on their technology and expertise, and, in return, they offer a piece of their niche market to a larger company. This creates a win-win situation for both companies.
Another method used by small companies to compete with larger companies successfully is to provide excellent customer service. Five Islands, for example, has developed a distinctive relationship with its customers by building and running a pub just next to the factory. That way, customers are able to provide the company with direct feedback about their products. It is easier for smaller companies to keep in touch with their customers than larger ones. This strategy works remarkably well with micro-breweries (Rodriquez 2003).
Finally, a small brewery can remain competitive by teaming up with other small breweries to enjoy certain advantages of larger breweries. One of the advantages that larger breweries enjoy, for example, is the reduced cost of procuring supplies. By teaming up and getting their supplies together, smaller breweries can give themselves the same advantage larger breweries have (Rodriquez 2003).
In your opinion, what flavours of beer, or niche markets, that don’t currently exist might be a commercial success?
Although this has been discussed before, it has certainly not been conclusively pursued by brewing companies. One of the beer niche market’s last frontiers is an exclusive brewing of ‘session beer’. Session beer is defined as a beer that contains an AVB of not higher than five per cent. It features a balance between malt and hops ingredients and has a clean finish (Bros 2005).
The term ‘session beer’ was coined in the United Kingdom during the First World War. During this period, there were designated times when workers were allowed to drink beer. These sessions were between 11 am and 3 pm, and 7 pm to 11 pm. These restricted hours meant workers needed a beer that they could drink and go back to work without being drunk and disorderly. Although this definition is not concrete or proven, it has continued to linger in the beer world over the years and has become an unofficial term for a beer with low AVB.
Concentrating on brewing session beers exclusively is a terrific way to have a strong market niche in a saturated market (Walen 2011). The beer market is so full of rival companies that manufacture similar flavours of beer and similar target customers. Beer manufactures seem to be increasing the amount of alcohol content in their beverages, and this does not suit the typical session drinker. If a company could, therefore, focus entirely on manufacturing session beer of different flavours and targeting different demographic groups, there would be tremendous potential for success.
Five Islands Brewing Company currently targets residents in a local geographic area plus tourists. Given the high tourist activity in the region, how might Five Islands expand to market its brand outside the current geographic region?
There are several ways in which a small brewery like Five Islands can expand beyond the region within which it operates. This answer focuses on three ways that are considered being best suitable for Five Islands. The brewery can increase its number of outlets and factories, start franchising, or do direct marketing in the new target regions.
Although it is an expensive option, constructing or buying new premises for additional outlets and factories is one of the best expansion methods the company may choose to adopt. Building additional outlets requires capital to build the new premises, transport raw materials or finished goods to the site, market, and hundreds of other costs. Without sufficient capital, this move could bring a small brewery to its knees. However, if it is able to raise additional capital and either open brewing or manufacturing centres, then expanded into a new market in another region will be hugely successful.
Another less expensive but highly effective form of marketing is franchising. Franchising is a remarkably convincing way of capturing and keeping new customers in a new market, even if the market is in another region (Gappa 2010). Franchises help customers form the mental image of a brand and how the brand can be beneficial to them in the present and in the future. The downside of franchising is that it does not favour a small company. The main reason for this is the lack of sufficient knowledge about the company’s products.
Finally, an old fashioned method of direct marketing is a slow but highly reliable way of marketing. With direct marketing, there are no channel intermediaries. A good example of a company that does direct marketing is Apple Inc. (Apple Inc. 2006). Instead of looking for distributors to sell their products, they choose to build Apple Stores and sell their products directly to their customers.
References
Answers.com 2011, What does total annual capacity for a company mean? Web.
Apple Inc. 2006, Direct Marketing. Web.
Beijerse, RU 2000, ‘Knowledge management in small and medium-sized companies: knowledge management for entreprenuers’, Journal of Knowledge Management, vol. 4, no. 2, pp.162.
Bros, A 2005, Session Beers, Defined. Web.
Gappa, B 2010. What Is Franchising? Web.
Kotler, P & Armstrong, G 2010, Principles of marketing. London: Pearson Publishers.
Rodriquez, G 2003. 10 Ways Small Businesses Can Compete With the Big Boys. Web.
Subramaniam, A 2009, New Product Development. Web.
Timken 2011, Timken Increasing Capacity Across Steel Plants. Web.
Walen, B 2011, A Migration Towards a Niche Market. Web.