New Product Strategies and the Product Errors
Introducing new product into the market remains a challenge for most business managers due to skepticism about performance of a given product. New product refers to an added innovation of the already existing products or introduction of a completely new product into the market. Product innovation accounts for 10% of all new products according to Viswanadham,. Quite a number of products that are considered new in the market have been reintroduced after some degree of improvement. New product is associated with two types of errors, Type I and Type II that are difficult to foretell, hence, the difficulty in determining product success or failure. This essay develops the concept of evaluating new product entry into the market through analysis of the two types of errors mentioned above with specific reference to Australian products.
There are three strategies for new products discussed in the report. The first is using innovation as a strategy. As already mentioned, innovation is one avenue for developing new products. The high rates of technological advancement render a number of products and services obsolete. As such, firms must move fast to adopt new technologies and develop new products. Innovation calls for strong company ethos and investment in Research and Development. Human resource management is also a vital in driving innovation in creation of new products.
Secondly, a firm can adopt effective customer management service as a strategy in creating new and unique products. According to Viswanadham, “For most customers, service and product are the same sides of a coin. Customer service is an opportunity for differentiation. Loyal customers are an asset,”. Improved customer service management systems in significant in making sure customers do not abandon products in favor of other products that are perceived to be better. Customer defection is a liability as it translates to lost sales. Creating unique and superior products is the main determinant of a successful product in the market. This is because it ensures customers remain loyal. Value addition is also a service strategy that can bring winning solutions to entrepreneurs.
Finally, another strategy for launching new product would be using speed as a strategy. Manufacturing processes, if accomplished in fast cycle times, can provide a number of advantages in capturing a significant proportion of market share. As mentioned above, technology hastens speed of developing new products. This has advantage and as noted by Viswanadham, “Being first or second with a new chip or new device makes all the difference between winning and losing and with smaller life cycles, the market window is small,” .A firm that releases a series of new products in the market is likely to benefit from advantages of a first-mover whereas a late entrant will face decline in market demand and low chances of becoming market leader. Another advantage of speedy product launch is that it reduces risks. A product that has low creation time will respond quickly to new market needs than those with long creation time.
Creating a new product involves designing, prototyping, testing, and marketing a new product, of which most require intellectual skills and high-level organization. The processes are mutually reinforcing and surmount to a well-established product that sells. The four processes of product creation are technology and resource improvement, strategic product development, product development, and process review. Some firms fail to review new product launch in order to have an insight on whether the launch came in too early or too late, Cierpicki et al., . Failure rate in launching new products; however, remains slightly the same if compared with the business environment five decades ago.
Managing new products is a critical management risk for business owners and there are strategic models to minimize risks. An example is stage-gate system. “Risks consist of two key elements, namely, the amount at stake and the probability of failure. Developing a new product is a highly risky because of huge investment requirements coupled with high uncertainty levels. In addition, high probability of failure due to complex and malfunctioning production processes may bring confusion at decision-making phase. Remedial measure to curb new product failure is through imposition of more screening controls prior to launching a new product. This reduces chances of evaluating a perceived product failure or success. Failure or success of a new product is perceived, as evaluation may not necessarily concur with market results. Evaluation process may lead to rejection of new product that would sell or accepting a new product that would fail.
Null and Alternative Hypotheses and the Type I and Type II Errors
Type I and type II errors occur in the manufacturing sectors due to adopted concepts in production engineering. The errors are classified based on hypothesis testing. Type I error is also known as producer’s risk, false alarm, alpha error, or false negative error. Type II error is also referred to as a misdetection, beta error, false positive, or consumer’s risk. The need to launch a new product following management decision requires testing of hypothesis. Testing a null hypothesis, (Ho) is the beginning step in hypothesis testing followed by stating alternative hypothesis, (Ha). As noted by Parasuraman et al., “hypothesis always pertain to population parameters or characteristics rather than to sample characteristics. It is the population, not the sample, about which we want to make an inference from limited data,” . The (Ho) and (Ha) are mutually exclusive, which means, if a new product will be accepted only and only if the evidence in alternative hypothesis is rejected.
The two types of error in Newman—Pearson theory in statistics are type I and type II, where refuting a false statement is Type I error and declining a true hypothesis is Type II error. Type II error in marketing refers to poor timing of product roll out that may lead to poor market performance whereas a specific future date would have been commercially viable. Type I and Type II errors are coupled by uncertainties that business managers can neither foresee nor speculate. There are managers who adopt the compensatory choice framework that emphasizes on exchanges between accepting a potentially weak product and errors in turning down a workable idea. “In so far they perceive an inverse relation between the likelihood of making Type I and Type II errors, entrepreneurs cab reduce the chance of one type or error only by increasing the chances of the other type of error,” . For every new product launch, business management team has diverging point of views on whether to accept or reject a new product.
Individual entrepreneurs also face dilemma between economic rewards and decisions on the two types of error. If an entrepreneur fails to make an innovation to improve current products, there is likelihood of missing a potential profit avenue from a successful product launch, which corresponds with making Type I error. Alternatively, a businessperson may incur economic loss by designing a new product fails in the market by making a Type II error. For a lower reservation level via appropriate framework like stage-gate system, an executive may lower the risks of rejecting an excellent idea or Type I error and increase possibility of accepting a bad idea or Type II error.
Market Products that Penetrated the Australian Market
Australian products have grown mainly because of patriotic nature the Australians. Most of iconic products started from simple production units to become part of Australian market culture. Among the companies behind successful products in the market are Hills Hoist, Cochlear Implant, Vegemite, Billabong, and XXXX. Billabong is a reflection of youth and modern styling firm that grew until the global financial crisis that crippled international economies. Billabong’s products symbolize a sense of adventure that moved from designing beach clothes to other clothes. The new products are not exclusive to beach events but normal casual dressing. The brand now has global appeal with strong presence.
XXXX is a beer manufacturer is Australian and the product is a reflection of Australians way of life. The products are representing a good feeling of the Australian lifestyle. Dominance of XXXX products, however, faces stiff competition from mainstream beer makers and given the increasing demand for wine and alcopops. These products have saturated and segmented alcohol industry. The third market success in Australia is Cochlear Implant that stands as one of the most successful firms in history of Australia. One of the new products by the firm is Professor Graeme Clark’s innovation, “the artificial hearing device produces useful hearing sensation by electronically stimulating the nerves inside the inner ear,”.
Vegemite is also an Australian brand that beats Coca Cola and Nike in popularity in the world market. Survey by IBM showed that Vegemite was most popular brand despite 98% of consumers being Australians, . The final products to have entered the Australian market are products by Hills Hoist. The firm was first, in the history of Australia, to have made clothes for the Olympics opening ceremony. The firm has diversified its market range by engaging in other products, one being antenna. Today the firm is the largest antenna producer in Australia today, (McPhee, 2009). All these firms and their products have one thing in common. They all reflect the Australian culture and demonstrate how patriotism of the Australian people defies odd to become market leaders despite starting as simple firms.
Market Products that Failed in Australia
Starbucks, the American coffee maker is an international brand that faces market failure in Australia. It plans to pull out the market due to challenges of globalization. Berg speculates that the success of the outlet in America is attributed to the American coffee culture. National Coffee Association engaged in a vigorous campaign that coffee would keep people awake and this became the coffee culture in America. However in Australian, the atmosphere was different, (Berg, 2008) asserts, “Particularly in Melbourne, we have better coffee and more relaxing cafes than anything that Starbucks brought with it.” The failure of Starbucks market entry into Australia can also be attributed to anti-globalization thinking that refutes cultural diversity.
The second product that is being speculated that it would fail in the Australian market is iPad. This according the LeMay is due to five main reasons. The main point is that the Australian tax regime is high for technology devices. “Many technology vendors charge Australian significantly higher prices for the same products than US residents,”. In addition, given that Australians tend to shy away from foreign products in favor of their domestic products, the chances of iPad penetrating the market are slim. Other failed products in the Australian market were initiated by banks in the country to curb effects of the recent economic crisis. The Royal Bank of Scotland, Bank of America Merill Lynch and Swiss bank in Australia took measures to restructure the firms but failed. It is for this failure that heads of equity restructuring left, . Other product failures according to were experienced in the international trade between Australia and Southeast states due to bilateral trade agreements.
The concept of launching new products in the market should be a well thought process by business managers. New product launch should be a result of thorough R&D, which essentially calls for investment in research. This essay has established that the most important way of forecasting market for a new product is by analyzing the two types of error. Following new product strategies and analysis of these errors, a right or wrong decision on launching new product should be based on interpretation of statistical data. Success or failure of a new product in the market can also be misguided, for instance the cases of Australia demonstrate this fact. In order to succeed in market diversity, it is essential to take into consideration culture of the people in the country where a new product is launching.