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The Effects Of New Product Development Marketing Essay

The research is based on the effects of New Product Development strategies on consumer choice and preference. New product development strategies comprise of three variables namely a) design development strategy b) design sourcing strategy and c) design testing strategy. Design development strategy focuses on strategies used to do in-house designing, design sourcing strategy focuses on strategies used to take designs from others and finally, design testing strategy deals with how to test the market acceptability and functionality of new designs. Two variables are designed namely variety and new designs for measuring the consumer choice and preference.

After World War Two, the competition between firms worldwide was primarily on the basis of cost and then afterward on the basis of quality. With a lesser amount of competition, the ability to produce products was the dominant factor but now the markets have become very expansive, hence exceptional design and reliability along with goods and services are the deciding purchase aspect. It leads to loss of quality and delay to market and increased costs. New Product Development strategies make sure such mismatches don’t arise and that competitive advantage is maintained and new successful product are launched. Pakistan is considered as one of the developing countries in South-Asia with a population of more than 185 million (Population Reference Bureau, 2010).

Scholer, Haque, Zakaria and Bijl (2007) argues that according to European Union report on Pakistani footwear, Pakistani footwear firms produces annually around 240 million pairs of footwear of which and around 20 million pairs are exported. The recent statistics portrays the fact that the exports have increased to around US$150 million per year. Pakistan's share in the global footwear market of over US$70 billion is around US$150 million only.

In almost all countries in the world, footwear has the high demand and averagely growing demand in the most developing countries. The business carries larger potential for profit and is of trading nature. Unfulfilled demand, good profit margins and changes in fashion are few incentives for new entrants in this business, especially for those who are devoted to quality product (SMEDA, 2006)

According to the Datamonitor report on the global footwear market the total revenues in 2009 had a $ 196.25 billion, a compound annual growth rate (CAGR) of 3.7% in the period 2005-2009.The global footwear market, spanning 2.6% growth in 2009 reached $ 196.3 billion value. Compared to Europe, and Asia-Pacific market with CAGRs grew up in the period by 3.4% and 4.4% respectively, and $ 77.17 billion and $ 33.52 billion in 2009 to reach their respective values. In 2014, a forecast for the global footwear market value of $ 230.8 billion a 17.6% increase since 2009. Market growth is forecast compound annual rate of 3.3% in the period 2009-14 (Datamonitor, 2009).

According to Akhtar, Zakir and Ghani (2008) Significant growth in the Pakistani Shoe Industry has taken place, but has no vision for the industry to be marked and subject to competition in emerging economies such as China and India. A general perception that after suffering especially after China's aggressive competition, the footwear industry is doing better in the previous two years and it is regaining the strength to accomplish the current demand as well as the local market as well as compete proficiently in the global market.

According to Rossi (2001), the lack of information in relation to the proper match has delayed the progress of design and the choice of footwear. Witana, Feng and Goonetilleke (2004) argues that in recent years, with enhancement in scanning technology, mathematical modeling techniques, and 3D visualization methods computer scientists have been developing algorithms for matching 3D objects. Witana et al. (2004) further argues that the most important goal of such studies is to automatically hunt for matching objects (e.g., footwear) in 3D archives using renovation and correspondence estimation techniques.

According to Castelli (2006) as business develops, the customer base also develops broader. As the elite of the world is growing larger and more versatile and an excellent reputation for quality grew well-established brand names: at the moment and characterization of the image is in turn one of the most important aspects in order to get a positioning into the market. Today customers are looking for products that are highly characterized by a level of quality, reliability and perfection of details.

According to Russell (2003), shoes are considered to express the personality of the wearer and possibly even able to magically transform them into a handsome, beautiful, happy, confident, or heroic people. For young people, shoe key signifier of their identity and shoes they desire often conflicts that their parents deem appropriate. Shoes appear as a key vehicle in which adolescents and young adults to work out issues on a consistent, national identity, lifestyle, gender, sexuality, individuality and personality.

According to Morris, Jehoshua and Teck (1996) several empirical studies have revealed that a new product's success depends critically on its performance and its value to customers. Cooper and Kleinschmidt (1987) verified that product superiority in terms of innovativeness, unique features, and performance is a key factor that differentiates new product winners from losers.

NPD is necessary for footwear enterprises to keep up the market share and sustain competitive advantage. According to Annacchino (2007) NPD is the ‘response’ to new technology and unstable market conditions. According to Chris, Tanika, Irene, Jonathan, Greg and Christina (2007) Consumers often cannot articulate their preferences or certainly may not have considered preferences for a product or service which they take for granted. In some circumstances they may even be motivated to misrepresent their preferences to researchers particularly if they believe that their responses will have an effect on the prices they pay for their product or service. Preferences or weighing needs against provided product or service attributes fallout in the balance of satisfaction pointing in a positive or negative direction, depending on whether interests are corresponding or conflicting. This determines the way in which people assess companies’ or utilities’ performance. Only when a consumer’s needs for a stated good or service are met, i.e. when the service provided corresponds with their preferences, will they think that they are satisfied.

Problem Statement

To study the relationship between New Product Development strategies of shoe maker and consumer brand perception and preference.

1.3 Hypothesis

There are five hypotheses which are as follows:

H1: There is a positive impact of new product development strategy on consumer brand preference.

H2: There is a positive impact of design development strategy on consumer brand preference.

H3: There is a positive impact of design sourcing strategy on consumer brand preference.

H4: There is a positive impact of design testing strategy on consumer brand preference.

H5: Consumer select the same brand what she prefer.

1.4 Outline of the study

The aim and objective of this research is to explore the effects of new product development strategies on consumer preference and choice. New product development should be essential for company survival and growth (Hart, 1996). The research will comprise several basic questions which should be answered (Davis, 1993) including what products actually to develop, how to design it, how to market it and what impact it will have on consumer brand choice?. The research will focus on main reasons for using NPD tools which will include problem identification, gathering data to support the company sales force and increasing the level of success of new products. The second purpose of this paper is to study consumer choice and preference under circumstances where they are provided with new designed shoes.

1.5 Definitions

Liu, Chen and Tsai (2005) defined a new product development strategy as: (1) an enterprise’s development orientation for a new product; (2) market characteristic orientation for a new product; (3) technological characteristics and innovation level for new product development. According to Chris et al. (2007) Consumer Preferences is defined as: “This is used primarily to mean a function that has the greatest expected value of the average number of options. This is an economic definition and does not tap into ‘wishes’ or ‘dreams’ but for all practical purposes is an appropriate definition”. In the marketing dictionary brand choice is defined as: The selection of one brand from a set of alternative brands (MarketingPower, 2010).

Chapter 2

Literature review

The literature review starts with identifying the different new product development strategies that the Pakistani footwear is adopting. The second part of the chapter includes the theory related to new product development strategies which can be applicable for footwear. Finally the last part discusses the consumer brand choice and preferences.

Footwear is a Fast Moving Consumer Group (FMCG) as it is classified as a fashion wear product. According to Baron (1991) Fast Moving Consumer Goods (FMCG) are low-priced items that are used with a single or limited number of consumptions. Scholer et al. (2007) argue that according to a report of EU, Pakistan in the leather industry is a globally a giant player. Pakistan ranks as the world third largest exporter and presents 11% of the world’s exports in value terms. Pakistani footwear is largely exported to the Middle East and about 10% of exports go to the UK. The footwear market growth is at a rate of 12% per annum.

Scholer et al. (2007) found that Pakistan manufactures about 240 million pairs of shoes annually and from which about 20 million pairs exported, and thus its exports of footwear's contribute to amounts to $ 150 million. Pakistan footwear industry can be divided into organized and unorganized cottage industry. 20% belong to the organized cottage industry, while 80% of the footwear industry is one of the unorganized. The organized sector consists of fully mechanized shoe-developed devices and the unorganized sector consists of labor-intensive units that have been partially mechanized factories and modest capital investment, in comparison with the fully automatic installations of the organized sector. Lahore is footwear center of the state, followed by Karachi, Faisalabad, Hyderabad, Rawalpindi and Sahiwal.

Martınez (2008) states that the leather footwear production cycle has been usually divided into six phases: beginning and design of the product (creation); cutting of leather in fulfillment with the model’s specifications by means of laser techniques, high pressure water jet or vibrating knife (cut); sewing procedures and preparation of cuts through gluing (pre-stitching); joining the cuts using different stitching techniques (sewing and pre-joining); amalgamating of the shoes’ components by means of automatic equipment (assembly); and concluding treatment with a view to improving the appearance of the footwear, including a series of mixed procedures (finishing).

Abd Rahaman and Muhammad (2003) argues that the NDP is the key to become a market leader and efforts should be given to the product design, so that the total cost, as well as design and development time can be minimized. Meyer and Roberts (1986) pointed out that new product development strategy can consist of the following two ways: (1) technological innovation: new technologies needed to develop a new product compared with the company’s original technology, (2) market newness: a new target market for new products compared with the previous users of the product. Oh and Kim (2001) expanded the new product strategy in several sub-strategies, the first sub-strategy is related to product-related technology. This strategy focuses on product characteristics, such as technological complexity, orientation, and innovativeness. The second sub-strategy is related to market-related characteristics. This strategy focuses mainly on the market of novelty, growth and competitiveness. The third sub-strategy related to the organization characteristics. It focuses on building the project organization, such as resource allocation, sharing of decision and the top management commitment.

According to Chung and Hsu (2010) the four dimensions of new product development strategies are: (1) innovative capacity to develop new products, (2) skill capacity to develop new products, (3) the market development capacity for new products, (4) R & D capacity to develop new products. The study by McDonough, Kahn and Barczak (2001) states that researchers have adopted six elements of performance measurement product development: (1) achieve the goals set for the team, (2) to bring products to market quickly, (3) successful development of commercial products (4) developing high quality products, (5) meeting the needs of customers, (6) the overall performance satisfaction towards to new product development. Braczak (1995) evaluated a new product development performance using four points: the level of profitability, market share targets construction, sales goals and overall satisfaction with new business efforts for product development.Listen

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The study by Gruner and Homburg (2000) the four dimensions to measure the performance of new product development are: new product quality, financial success of new products, the quality of new product development process, inexpensiveness new product ownership.

Griffin and Hauser (1996) indicated that a successful new product development and marketing will be able to achieve profits in a timely fashion. Liu et al. (2005) adopted by the three indexes to measure the performance of new product development: (1) a new product life cycle (2) new product sales and profits, (3) time to market of new products. Hsu et al. (2010) adopted by the five indicators to measure the performance of new product development, they are: (1) the time a new product enters the market, (2) the quality of new products, (3) the market share of new products, (4) the ratio of new products into the market successfully, (5) to develop a new product in the market costs. Griffin (1997) clearly indicated that a new strategy for the development of products has the existence of a positive impact on the success of new products.

For the New Product Development Strategies the model is illustrated in Fig. 1.

New Product Development Strategies (Figure 2.1)

D D S

consumer brand perception

D S S

consumer brand choice

D T S

New product development strategies comprise of three variables namely a) design development strategy b) design sourcing strategy and c) design testing strategy. Design development strategy focuses on strategies used to do in-house designing, design sourcing strategy focuses on strategies used to take designs from others and finally, design testing strategy deals with how to test the market acceptability and functionality of new designs.

According to Martínez (2007) the process of globalization has created a strong global pull from growing demand and a push from growing competition. Both effects have caused a new wave of internationalization that involves the transfer, outsourcing of production and the emergence of new countries as a supplier base for the manufacturing industry. Outsourcing is diverting some of its productive activities or services to other companies to achieve lower cost, superior flexibility, or speed up the process. Outsourcing is the tendencies that have become quite common in the manufacturing industry and the reality of global scope. Baldwin and Clark (2000) states that the outsourcing, or select any part of the provider, enabling companies to benefit from competition among suppliers.

Joseph (1967) states that the general preferences are intermediate variables that affect consumer brand choice, not directly observable, they are derived from the behavior of consumers. For a better understanding of how customers use price information in the choice of the alternative brands frequently purchased product categories. Manohar, Chi, Heikki and Yoshi (1990) have used a two-stage modeling procedure. The first step is to investigate how expected prices are formed. Brand selection is assumed not only on the retail prices of different brands, but also how that retail prices deviate from their corresponding expected prices.

Hina and David (2008) argue that the when a product is made, the country is identified to consumers, previous to exposure to the attributes of the product, then the image of the country as a producer of the product line affect the product's image by the image of the brand product line. If a product is made in the country, is announced when the product attributes are evaluated, the image of the country directly as a producer of the product line affect the product image. Hina et al. (2008) further states that in addition to the perception of product quality it is affected by other exogenous cues such as price, social influence, consumer gender, income, education, and professional background. All these factors influence purchasing decisions of consumers. Therefore, purchasing decisions are also influenced by other extrinsic cues; such information cues affect the image of each alternative product and product choice. Customers look brand-related knowledge from the experiences of their peer group, for example, friends, neighbors, relatives, employees and work. The group evolves beliefs, attitudes, and way of behaving.

Terence (1981) argued that consumer choice can easily provoke the memory of a general evaluation involving or affecting each alternative to the treatment of beliefs about attributes. This is most likely the choice of behavior where consumers prefer minimal processing. Advertising processing experience provides an alternative basis in cases where consumers have never tried a particular brand. That is, in the absence of an alternative source to provide an evaluation of a brand, consumers can simply transfer his feelings for the ad to the brand. Terence (1981) further argues that evaluative connotative reactions, such pleasant feelings are a result of exposure to consumer products that appeal described in ads, portrayed attractive, or advertised in the context of other pleasant stimuli (music, scenery, characters etc.). The mediated stimulus effects of these connotative reactions that represents unconditioned stimulus (UCS). Denotative responses also result from exposure to advertising. The incentive effects of the denotative responses stored in the memory also serves as conditioned stimuli. Linking a connotative response (eg a feeling of joy, or nostalgia) with a denotative response (eg, "This is a brand of toothpaste I had never heard of) will, if properly implemented, results in a conditioned emotional influence toward the advertised brand.

Kotler (1988) sees advertising as one of the four major companies to use communication tools to target customer’s directly by convincing public and stressing that “it consists of non-personal forms of communication conducted through paid media to clear the title sponsorship." According to him, the purpose of advertising is to improve responses to potential buyers' to the organization and its offerings, noting that "we try to do this by providing information, channeling desire, and giving reasons for preferring a particular organization's offer”. Kazemi (2010) states that from the above, one can conclude that the purpose of advertising is to create awareness of the advertised product and to provide information that will assist consumers in making purchasing decisions, the importance of advertising as a promotional strategy, therefore, depends on its ability to influence consumers not only buy but to continue to recover and ultimately develop brand loyalty. As a result, many organizations spend an enormous amount of money for advertising and brand management.Listen

Toffli and Laroche (1999) argues that research shows that the final act of purchase is a multi-step process: first, consumers choose brands, including the final selection (a form consideration set), and only then makes its choice.

According to Byung, Young and Wei-Na (2004), consumers with high product knowledge will exercise less search effort than those who have a low knowledge of the products. Johnson and Russo (1984) argues that this phenomenon may be clearer with a choice task in which the information selection skills of experienced consumers a role, then a judgment task. Biehal, Stephens and Curlo (1992) argue that consumers who are less well-known with a product grouping should to some extent, built on the site consumer preferences.

CHAPTER 3

RESEARCH METHODS

This chapter explains the methodology used for this research study. This study focused on the effect of New Product Development strategies on consumer choice and preference. A method is a tool that can help solve problem and research new knowledge.

3.1 Method of Data Collection:

The response from the respondents was taken through personal survey technique. The respondents were selected by first asking them to rank the given eights outlets brands and secondly, they were asked that which type of shoes they prefer. In the second questionnaire the Managers of the shoe industry were selected by first asking them the different new product development strategies they adopt.

3.2 Sampling technique

Convenience sampling technique was used in this research. Based most often on questionnaire, data are standardized and allow easy comparison. The data collection approach used for the research was survey method with questionnaire, being the measurement tool. This sampling was collected from the different female consumers who go to Shoe outlets and selected shoes outlets managers. Questionnaires were filled through asking or by giving them.

3.3 Sample Size

The sample size was taken of 162 respondents (150 Consumers and 12 Outlets Managers).

3.4 Instrument of data Collection:

The research instrument is based on self administrated survey questionnaire. Instrument for data collection based on close ended questions containing different questions asked to different consumers about their perception of shoes they buy. Secondly, questionnaires were filled by selected shoes outlets managers. The questionnaires consist in different type of question. These question focus on consumer brand choice and preference. The opinion differs from consumer to consumer. In the case of managers the questionnaires consist in different type of question. These question focus on implementation of new product development strategies.

3.5 Statistical tool used:

In this research Wilcoxon signed ranks test and correlation was used for the analysis and interpretation of the data. According to Crichton (1998) the Wilcoxon signed rank sum test is a non-parametric test used to test the median difference in paired data. It is used to test the null hypothesis that the median of a distribution is equal to some value. According to StatSoft, Inc (2010) Correlation is a measure of the relation between two or more variables. Pearson correlation assumes that the two variables are measured on at least interval scales, and it determines the extent to which values of the two variables are "proportional" to each other.

CHAPTER 4

RESULTS AND FINDINGS

Table 4.1

H1: There is a positive impact of new product development strategy on consumer brand preference.

From the above table this can be observe that the significant value of new product development strategy variables related to consumer preference is less than 0.05 which is equal to 0.003 which is significant. This tells us that, our null hypothesis is accepted therefore, just as we predicted, as consumer preference increases, new product development strategy increases. The new product development strategy has positive correlation with consumer preference.

H2: There is a positive impact of design development strategy on consumer brand preference.

From the above table this can be observe that the significant value of design development strategy variables related to consumer preference is more than 0.05 which is equal to 0.058 which is insignificant. This tells us that, our null hypothesis is not accepted therefore, just as we predicted, as consumer preference increases, design development strategy decreases. The design development strategy has positive correlation with consumer preference.

H3: There is a positive impact of design sourcing strategy on consumer brand preference.

From the above table this can be observe that the significant value of design sourcing strategy variables related to consumer preference is less than 0.05 which is equal to 0.00 which is significant. This tells us that, our null hypothesis is accepted therefore, just as we predicted, as consumer preference increases, design sourcing strategy increases. The design sourcing strategy has positive correlation with consumer preference.

H4: There is a positive impact of design testing strategy on consumer brand perception.

From the above table this can be observe that the significant value of design testing strategy variables related to consumer preference is less than 0.05 which is equal to 0.003 which is significant. This tells us that, our null hypothesis is accepted therefore, just as we predicted, as consumer preference increases, design testing strategy increases. The design testing strategy has positive correlation with consumer preference.

H5: Consumer select the same brand what she prefer.

Table 4.2

Wilcoxon Signed Ranks Test

The above table explains the respondents brand choice and brand preference. The results shows that 60 respondents of Walk ease shoes out of 150 have made the similar choice and preference which is higher than other 7. Overall the H5 hypothesis was rejected and the result depicts that respondents brand choice is not based on brand preference.

CHAPTER 5

Conclusion:

Interview results concluded that metro shoes and 1st Step outlets did not even pay heed to some of the tools and techniques in DDS such as DFM/A and QFD, neither they use latest machinery such CAD/CAM. In case of Walk Ease and Style Walk they use latest machineries and adopt all components of new product development strategies. New product development Strategies helps in producing new and innovative products. Successful product development is only liable to be successful if people, process and technology are carefully matched. Today’s competitive environment demands product strategy which can systematically and continually bring new products to the market. The continuing credit crisis has changed the buying patterns of the consumers worldwide. Thereby in order to maintain a sustainable competitive advantage, it is vital to understand their needs. This in turn is only made possible provided, an effective new product development strategy exists.

Limitations of research:

Even though interviews were conducted from directors and chief executives, yet there is a tendency in the interviewees not to disclose all information with the fear that the information may be leaked to the government. In Pakistan firms restrain from revealing true financial figures due to the fear that the government may impose more taxes on them.

Suggestions:

This research would be aimed at comparing Pakistani footwear industry’s NPD strategies with others, in order to get a transparent picture of the tools and techniques used.

Recommendations:

Support from government is highly important in order to ensure the growth of footwear industry. Without the government support footwear industry are on the verge of collapse. Due to economic recession, stiff market competition and a host of other problems (discussed in the literature) associated with footwear industry have resulted in the closure and bankruptcy of many footwear outlets in Pakistan. To make sure the managers and team members understand the key objectives, responsibilities, expected deliveries and tasks involved in the new product development strategies, a mini booklet can used as a check list. Footwear Training Institute should be established, which should have functional departments such as R&D, product testing and human resource development in which the outlets employees should be given training. Establish links with developed countries footwear specialists to acquire training in skilled shoe machines operation, design and technology, costing techniques, workshop management and pattern engineering. Visits should be made to footwear shows in EU, such as Expo Riva Schu in Italy, GDS, and observers viz etc and latest shoe brands in the expensive cities of the world twice a year to check for the latest trends, designs and fashions. Regular and continuous marketing should be encouraged through advertisement channels flyer distribution, Cable TV, etc.

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