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NEW PRODUCT DEVELOPMENT TEST MARKETING PROSPECT AND CHALLENGES

CHAPTER ONE

INTRODUCTION

1.0   BACKGROUND OF THE STUDY

New products play several roles for he organization, they help maintain growth and thereby protect the interests of investors, employees, suppliers of the organization. New products help keep the firm competitive in a changing market (Patrick, 1997). The consequence of product development have a direct impact on competitiveness. They mean the difference between falling behind a leading competitor in the market and being the competitor who provides leadership, compelling others to meet similar standards(Wheel Wright and Clark 1995).

Finally, new products spread the marketing risk. The investment community values new products; new product affect the top line and therefore enhance the value of the firm and shareholder value (Patrick 1997). The academic and the business periodical literature are replete with derailed listings and explanations of both why new products fail and what factors are related to success. There is no shortage of guidance available to those interested in achieving the revenue growth, profit growth, and reputation for innovation and leadership associated in achieving the revenue growth, profit growth, and leadership associated with successful new product launches. Organization invest many human, material and Monetary resources in new product development. In addition, much research by both the academic and industry sectors, has been conducted regarding the factors involved in new product failure as well as success. Yet the statistics that we frequently hear cited about product failure are frightening. How can these seemingly contradictory facts be reconciled

The key driver of the efficient consumer response (ECR) initiative is an industry estimate that the excess cost to the grocery system in the product development and introduction process renege as high as 4% of net sales these costs include both.

v All development and introduction costs associated with  failed products, including product cancelled before introduction as well as products will drawn after launching.

v Excess costs incurred in launching successful new products, principally excess manufacturing costs due to an initial massive inventory building needed for introductory deals and special offers  e.g free goods.

Industry data from a study commissioned by the joint industry task force on new products and conducted  by Deloitte and Fouche consulting Group in 1995 suggest that new product introductions cost the food system (manufactures, brokers, wholesalers and retail grocery stores? Approximately & 252 per skill, per store. It is important to note that the study was conducted using 1988 data. Assuming and industry inflation rate of only 2.5% over the past 10 years, this figure now approximates #320 per skill per store. The industry clearly spends a great deal of money on products that are introduced but do not succeed.

The intention of this research is to look at the problems and prospects of test marketing of new products with on Guinness Nigeria plc.

1.1   STATEMENT OF THE PROBLEM

The purpose of the study is to look at the prospects and challenges of test marketing as the affect now product in Nigeria

1.2   OBJECTIVES OF THE STUDY

This research work has the following objectives:

1)  To look at test market as it relate to breweries industries in Nigeria

2)  To identify the role of  test marketing in the  sales of new product

3)  To examine the challenge associated with marketing of new products

4)  To learn the reason for conducting a test market

5)  To examine the effect of test marketing on the profitability of an organization

6)  To identify the challenges and prospects of test marketing of new products.

1.3   HYPOTHESIS

Hi:    Test marketing has effect on the sales of new products

Ho:   Test marketing has no effect on the sales of new products

Hi:    Test marketing has an effect on the profitability of a organization

Ho: Test marketing has no effect on the profitability of an organization

1.4   SIGNIFICANCE OF THE STUDY

        A key aspect of FCR, efficient product introduction, addresses the concern about the alarming number of new products launched each year and the fact that most of these are live extensions (Kaln and McAlister 1997). The July 1997 issue of progressive Grocer included a supplement entitled “Efficient new product introduction”. This report was intended to “describe techniques for new product introduction advancing the understanding of distributors, brokers and manufacturers within the grocery industry and cited project undertaken by Ernest and young who provide the data cited in the report prime group, inc as part of the study, computed product introduction success and failure rates.

        Defining what constitutes a new product success or failure is a critical first step in computing and assessing success and failure rates. If a product concept demonstrates enough strength during early stage testing to warrant investment in product development, but fails to survive beyond product or market testing is this a new product failure? If a new product as launched and gains retail distribution and generate  revenues but those revenues fail to meet stated targets is that new product a failure? If a new item is launched and gain retails distribution generates revenues but this revenues fails to met stated targets is that new product a failure? If a new item is launched and generate significant first year distribution and revenues, but loses distribution and revenues after the seasonal or are merely replacements for other products in our existing line?

        Clearly, therefore, the industry needed to develop a consistent definition of what constitutes new product success or failure. However, even more basic was the need to clearly define what constitutes a new product.

        Is a product new because it is new to the consumer? Most industry observers agree that a product new to the consumer is a new product. But how about a product that is new to the company? Or a product that represents improved performance?

        The progressive Grocer report is notable for its specification of (1)  a classification scheme for new food and allied products which differentials new products from new it PCS: (2) a specific definition of product failure which is used as a criterion to determine whether a new product is classified as a success or a failure and (3) empirical data on failure and success rates. Previously, with the exception of data provided by information resources incorporated in their annual “New product pacesetter” reports, little actual data has been provided to wither confine or contend the conventional wisdom that 4 out of 5 (or worse) of all new products fail.

1.5   SCOPE OF STUDY

        The scope of this study include new product development, test marketing prospects and challenges. Using Guinness Nigeria plc Bottling company Edo State as a case study. It will be done from the period of January to August 2014. accommodated the records for a period of 2 years with Guinness Plc or their distributors.

1.6   DEFINITION OF TERMS

1) New products: New products are good and services that differ significantly in their characteristics or intended uses from products preciously produced by the firm.

2)  Efficient consumer response (ECR): is a trade and industry body working towards making the grocery sector as a whole more responsive to consumer demand and promote the removal of unnecessary costs from the supply chain.

3) Product development: The creation of products with new or different characteristics that after new or additional benefits to the customer. It may also involve modifying an existing product.

4) Product concept: It is the understanding of the dynamics of the product in order to showcase the best qualities and maximum features of the product. Product concept believe that customers prefer products that have the most quality, performance ad features.

5) Product launch: A product launch is the initial showing of a product. The first time a customer see and can purchase the product. It refer to a new product coming or being launched into the market.

6) Test market: In the field of Business and marketing, is a geographic region or demographic group used to gauge the validity of a product or services in the mass market prior to a wide scale rollout.

7) Organizational environment: They are institutions or forces outside the organization  that potentially affect the organizations performance. These include supplies, customers, competitors, government, regulatory agencies, public pressure etc.

8) Cross functional team: Is a group of people with different functional expertise working toward a common goal.

9) Market test: The selling of a new product in a limited area to see how will it sells and highlight any possible problems.

10) Virtual test market: Is a computer simulation of (tens of) thousands of virtual consumers that react via purchasing decisions to new (and existing) product offering  and marketing campaigns. As a result, the virtual test marketing yields a market share prediction for each product on the virtual market.

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