Market Research and New Product Development

Introduction
“Marketing research is the function that links the consumer, customer, and public to the marketer
through information… information used to identify and define marketing opportunities and
problems; generate, refine, and evaluate marketing actions monitor marketing performance; and
improve understanding of marketing as a process. Marketing research specifies the information
required to address these issues, designs the method for collecting information, manages and
implements the data collection process, analyzes the results, and communicates the findings and
their implications.”1
It includes the collection and analysis of information regarding consumers (potential customers),
competitors (same business type), and the effectiveness of marketing programs (i.e. direct mail
marketing, newsletters, signage, etcetera). Market research is an important action before leaping
into a business, and an educated move that determines the feasibility of a new business

Types of Research
1. Basic Business Research
Basic or pure business research is conducted with a generalized outlook. It either opens new lines
of research or cuts off existing lines of research. Basic research allows generalizations that can
impact areas outside the original area for which it was invented. (Linda L. Golden*, 2012). For
example, a basic research may be conducted by an organization to see what currently is
happening in the company and which areas require changes.
2. Applied Business Research
It is conducted to address a specific business decision for a specific firm or organization. For
example, if a product is not selling well, then the managers need to find out the reasons behind it.
A car company while researching the uses of a car trunk, observed the behavior of families in a
supermarket’s parking lot. They observed the uses of the trunk for their target market, and then
designed the next model specifically to address needs of the target market. This is applied
business research.

Importance of Research
As the business grows, market research needs to be an ongoing part of business activity. Market
can be extremely unpredictable and this is one main reason why market research (MR) needs to
be integrated. MR is a time consuming activity but nevertheless essential for the survival of the

1
American Marketing Association Website
business. No matter what size the business is, some sort of research is required at every stage.
Activities like talking to a customer about what he or she wants, or chatting with a supplier is
conducting market research.
Research can be carried out using one or two of the following techniques:
Qualitative research is carried out through Focus Group Discussions (FGDs) or In-depth
Interviews (IDIs). Owing to the variation in cost, most managers commissioning research find
better business sense in opting for FGDs as the cost per respondent is lower. On average, a FGD
of eight respondents’ costs approximately Rs. 40,000 in Pakistan.
Quantitative research is used to quantify the problem by way of generating numerical data or
data that can be transformed into useable statistics. It is used to quantify attitudes, opinions,
behaviors, and other defined variables – and generalize results from a larger sample population.
Quantitative data collection methods include various forms of surveys – online surveys, paper
surveys, mobile surveys and kiosk surveys, face-to-face interviews, telephone interviews,
longitudinal studies, website interceptors, online polls, and systematic observations.

Research Techniques
Brand Health Tracking; engaging consumers in quantitative researches to understand their
perceptions. Some research agencies in Pakistan have greater reach and are therefore able to
provide a high resolution brand tracking service with 18,000-20,000 customer respondents.
There are others that are smaller in size and provide a low resolution brand tracking service with
4000 customer respondents.
Retail Audits; Retail audit service providers gather information on a brand's sales volume, sales
trends, stock levels, effectiveness of in-store display and promotion efforts, and other associated
aspects. It includes checking the market performance of brands and analyzing the off take from
retail shelves. This helps in validating sales figures and calculating market share.
Mystery shopping; commonly used by banks and restaurants, to check the quality of customer
service provided by their staff. These researches may be carried out immediately after or before
staff training.
Shopnographies; A shopper is accompanied by a moderator during a shopping trip. The
moderator observes the shopping behavior and may ask probing questions before, during, or after
the trip. (Similar to ethnography only in a shopping occasion.)
Ethnographies; The central aim of ethnography is to provide rich, holistic insights into people’s
views and actions, as well as the nature (that is, sights, sounds) of the location they inhabit,
through the collection of detailed observations and interviews.
Other research techniques include filming, in-store interviews, eye tracking, controlled store
tests, activation workshops, observations, online shelf tests, path tracker studies, super shoppers,
world panel and virtual reality.
Current status of the global MR Industry
As markets throughout the world are becoming increasingly more competitive and integrated,
market/marketing research is on the agenda of many organizations regardless of their size and
locations. The key developments in the MR industry across the globe have been:
1. Rapid changes in client markets
2. Holistic research approaches
3. Faster Responses
4. Different levels of maturity
The "European Society for Opinion and Market Research" (European Society for Opinion and
Marketing Research) (ESOMAR) is the global organization that regulates and allows better
research of markets, consumers as well as, of societies. ESOMAR promotes the values of market
research and opinion, noting the real problems and thus achieving effective decision-making at
the global level. The global revenue of the market research industry in 2016 was 44.51 billion
U.S. dollars in revenue worldwide, up from 44.35 billion the previous year. (Statista, n.d.)
Global revenue of market research from 2009 to 2016, by region (in billion U.S. dollars)

Source: The Statistic Portal (Statista)

Marketing Research in Pakistan
The relationship between client/company and the research agency has evolved over time. This
evolution is depicted in the figure below:

Different markets in the world are at different stages of this evolution process. Pakistan, for
example is at the third stage and uses a research agency as a contributor to selected business
issues. India or more generally the Asian Pacific market is at the fourth stage where a research
agency is seen as a solution provider. Pakistan is unable to move to the stage of Trusted Advisor
because of multiple reasons such as, budget constraints due to which they do not hire advisors,
trust issues, lack of innovation and using the same agency as the competitor’s.
Pakistan is the 58th largest market in research around the world and ranks 16th in Asia (Central).
90% of the research turnover originates from domestic clients while 10% is contributed by from
international clients. (ESOMAR, 2014)
The market research spending (as a percentage of GDP) between 2005-2015 in Pakistan is shown
in the figure below:
In Pakistan there are 15-20 MR agencies (4-5 major ones). Total MR spending in 2008 was equal
to $14m in Pakistan versus $198m in India and $25m in Vietnam. The share of Pakistan’s MR
industry in the global MR industry is 0.04 per cent whereas of India it is 0.55 per cent. MR
spends as a percentage of advertising spends in Pakistan stood at a mere 3.1%. However, the
industry has been gradually growing and it is estimated that growth in 2008-09 stood at
approximately 20%. The focus of research is more towards the quantitative side (quantifying
understanding) which constitutes about 80% of the total research conducted whereas the
qualitative research work (exploring areas that are unknown) constitutes 20%.2
The estimated number of clients in the MR industry is 150+. Traditionally outsourcing the
research was thought to be a privilege of multinational firms in Pakistan, however now local
companies have also started hiring research agencies to conduct formal researches. Some of the
key players in MR in Pakistan are:
AC Nielsen, leaders in the research industry and most recognized for their retail audit service.
TNS Aftab, recognized in the industry as one of the oldest, possessing skilled human resource,
strong in conducting qualitative and customized researches.
Gallup, a social research firm, mostly conducting opinion polls and researches for the
government.
Foresight Research (Pvt.) Ltd., owned and managed by ex-Unilever research employees, the
company handles the consumer panels for Unilever Pakistan, providing time and cost effective
solutions.
Oasis, second largest amongst the research agencies in Pakistan with immense reach all over
Pakistan servicing a large number of clients, well known for their quantitative researches.
SB&B, a research firm more tilted towards qualitative research.
SMAR, pioneer of MR in Pakistan and known for its strong fieldwork execution.
Iris Communications, an emerging research organization mostly servicing the pharmaceutical
industry in Pakistan.
Access consumetrics Pvt. Ltd, full service agency (a sister concern of Access Retail) provides
innovative customized research solutions to clients across multiple sectors, providing actionable
insights via exploration & quantification of consumer actions
In addition, there is a Marketing Research Society of Pakistan (MRSP) which has adopted the
ESOMAR code of conduct. Its vision is to encourage, advance and elevate market research in
Pakistan – in line with international standards.3 There are 20 registered members from Pakistan
with ESOMAR. Registering with ESOMAR ensures that the code of conduct is followed in a

2
As quoted by Mr. Shakeel Ahmed Butt, Director AC Nielsen Pakistan, in a guest speaking session at IBA on
March 03, 2010.
3
Marketing Research Society of Pakistan – official website.
research organization. It further helps in winning business from clients. Furthermore, latest
ESOMAR researches are shared and members are offered trainings at discounted rates.
In addition to the above mentioned research companies, there are some other smaller research
firms in Pakistan. These include MARS, Four Corners, Startex, BSH, MCP, MEMRB,
International Field and Tab, MCP research network, World Research Information Systems and
Technologies (Pvt.) Ltd, Intelligent Marketing Research, etc.
The Indian MR industry has a stagnant annual growth rate of about 20 per cent while Pakistan
has an unstable seven per cent. Last year, Bangladesh was ranked number one with MR growth
rate of 25 per cent. The total number of professionals working for MR industry other than
interviewers is 495 across the country. The registered number of firms in India is 28 with 7465
professionals other than interviewers (Source: ESOMAR 2008). Indian economy in terms of
GDP is seven times bigger than the economy of Pakistan but the gap of research oriented skilled
labor is 15 times greater.
According to a research conducted in Pakistan there is a positive correlation of MR growth rate
with GDP growth rate. Market research is highly economic growth driven. According to some
business managers the need for MR increases in times of recession. This is probably due to the
fact that consumers are very conscious in spending and have an eccentric buying behavior that
needs to be intensively researched. Normally, what is observed is that in bad times, top
managements first cut on MR services which the research managers in some corporations
consider as non-productive.

Issues and Challenges of Marketing Research in Pakistan

1. Sampling Frames
Surveys are useful and powerful in finding answers to research questions, but they can do more
harm to business than good if targeted incorrectly. Researches in Pakistan sometimes render
meaningless because the available sampling frame is incomplete, inadequate and outdated. This
limits the ability of research agencies to choose the right respondents with the right profile. The
SEC classifications that are currently in use were developed in 1998 by ACNielsen. The only
way some accurate sampling frame can be developed is through the co-operation of industry
associations such as Chamber of Commerce, APTMA etc.
2. Heterogeneity of Universe
Heterogeneity of Universe (the entire population) is one big issue of MR in Pakistan. There is a
major difference in individual characteristics among the people of four provinces of the country.
We have an urban rural division of 30:70, where 30% population lives in urban areas and 70 %
in rural areas. This difference in geographical location is translated into the psychographics of
individuals and therefore the entire population cannot be pooled as one. Hence, selecting a
nationally representative sample is a difficult task.
Furthermore, market is segmented into the modern trade and the traditional trade. Since modern
trade still has not expanded Pakistani retail its reach to most parts of the country, most retails are
inconsistent and not follow a specified standard format. Thus, retail audit through sampling is not
reflective of the heterogeneous retail landscape of Pakistan.
3. Low Literacy rate
The country has a very low literacy rate. Collecting data through surveys and interviews is a
major challenge for researchers in Pakistan. Respondents are hesitant to share any information
because they are unable to understand the research purpose. Due to the low literacy rate self-
completed questionnaires have a very slim chance of getting completed and thus personally
administered questionnaires become a natural choice for the researchers. This of course is
expensive and time consuming. Consumers in some cases are not articulate enough to have their
responses recorded; refusals and non-responses thus becomes a major issue for researches.
4. Scarcity of Skilled Human Resources
Scarcity of key research personnel is a problem that research agencies in Pakistan face. To date
no single Pakistani business school offers specialization in marketing research. Employees
joining at the entry level take up research jobs only as a transitional option until such time that
they are able to find a more glamorous, mainstream marketing job.
Furthermore, the MR personnel who have become experts in the field through their number of
years in service are in high demand. There is a serious issue of high employee turnover.
Finally, the field-force required to conduct surveys is hired on an ad-hoc basis. This further
complicates matters and compromises the quality of research as the possibility of hiring trained
field workers is very rare.
5. Quality of research
The major beneficiaries of the MR products complain about delays in completion of the projects,
analytical base and dichotomy of the results. Only 35 per cent corporate firms are satisfied with
the services they get from local MR Service providers. Even the retail audit conducted is through
a sample and not a census.
6. Training
Researchers conducting both qualitative and quantitative researches need to be regularly trained.
Qualitative researchers need to have skills to manage and extract key insights from FGDs, IDIs,
Ethnographies, etc. Quantitative researchers on the other hand need training in the latest software
used to analyze data. Most research agencies in Pakistan do not invest in developing their
employees working at the middle or the lower level. Hence, most researchers in Pakistan are
working through their common sense.
7. Ethics / Credibility
Business ethics are relevant to business researchers because ethical issues occur throughout
many phases of the research process. Some of the ethical issues identified are:
  Confidentiality Fake responses
 Low cost and low quality
 No professional regulatory body
Credibility of research in Pakistan is not only poor but is also going down. Substandard quality
of field work is hindering growth of the MR industry in Pakistan.
8. Scarcity of published data and government support
One important MR issue in Pakistan is the scarcity of published data. ‘FBS’ Federal Bureau of
Statistics is hardly approached; neither is the Economic Survey of Pakistan. Because of this it
becomes very cumbersome to obtain authentic secondary source of information. These two
government bodies need to be properly administered and managed. At times the data has to be
purchased from foreign companies which is very expensive and becomes unaffordable for small
businesses. The MR industry has no support from the government. In fact, the country lacks
research culture at all levels.
9. Lack of research culture
A number of times researches are commissioned to verify personal hunches or gut feelings. This
kills the purpose of the research – a research must be conducted to identify the best route to take.
Researches do not make decisions; in fact, they help in making the right or an informed decision.
A number of local firms in Pakistan do not see research as an investment; instead it is seen as an
expense. They find better sense in investing the same research budget in other business activities.
Multinationals have a standard operating procedure and are therefore bound to periodically carry
out researches.
10. Lack of online presence
Online population in Pakistan is less than 15 %. It comprises youth and executive professionals.
Online methodology is recommended for special purpose surveys among segments like youth,
students and business executives. Clients should be carefully flexible in choosing “hybrid”
approach combining telephone interviews with online surveys.

Marketing Research in New Product Development

Market research should be used at all stages of the product life cycle, from the conceptual stage
through to maturity. It serves a lot of purposes, such as establishing and addressing (unmet)
needs, estimating likely demand, setting prices, shaping the specification of the product or
determining optimal price points, to name but a few examples. Market research can also unleash
potential opportunities for new products, as well as rejuvenate existing products, perhaps by
incorporating new features or finding new markets. Given the costs involved in innovation,
research and development, and commercialization, as well as the costs incurred in maintaining
an aging weak product, research for NPD provides a high return on investment. (Cupman).
Market environment is constantly changing. Due to the ever changing consumer needs and
behavior, continuous development of new products and improvements in the old ones has
become a survival issue for firms. Although innovation and renovation both are imperative for
market oriented firms, nevertheless Product development is a costly activity. It requires a lot of
financial and human resource commitment. Perhaps no business activity is more ennobled in its
perspectives and bondages (and with justified enthusiasm) than the new products and processes
development.

Stages in New Product Development Process

1. Idea Generation: includes need/problem analysis, and brainstorming.
2. Idea Screening: use a variety of product rating devices to limit the chance of any errors.
3. Concept Development and Testing: This means developing specific concepts which
would be aimed at specific target markets; start doing test marketing with focus groups;
can use conjoint analysis: a research method for deriving the utility that consumers attach
to varying levels of a products attributes.
4. Marketing Strategy Development: Creating a marketing strategy plan which includes:
Target market size, structure and behavior, the planned product positioning & sales, share
& profit goals for the first few years. Products planned price, distribution strategy and
marketing budget Long -run sales and profit goals and long term marketing mix
5. Business Analysis: Evaluating the marketing plan with special emphasis on sales, cost
and profit estimates. Must pass the business test criteria for further development.
6. Product Development: Developing prototypes. Use of Computer Aided Design (CAD)
and Computer Aided Manufacturing (CAM) to help. Conduct functional tests first
followed by consumer tests.
7. Market Testing: Big time testing with brand name attached and packaging developed.
This can be done in the following ways:
 Simulated Test Marketing is when you find 30 or 40 shoppers at a shopping center,
show them some ads, give them some money, and then see which brand they buy.
 Controlled Test Marketing relies on a panel of real stores to carry the new products
for a fee. Sales are measured through scanners.
Test Markets are the ultimate way to test a new product. Company puts forth a full scale
advertising and marketing plan for selected cities/regions. Can uses diff strategies in diff
cities to compare effectiveness.
8. Commercialization: This is when the product is formally launched. With
commercialization one has to ask three core strategic questions: WHEN, WHERE, HOW.
 When (Timing)–can be first entry, parallel entry, or late entry (late entry can be good
because the second firms can piggy-back on the first firm’s advertising, can take
advantage if there is a problem with the first entry’s product, and can learn market
size).
 Where (Geographical strategy)–start out regionally, or nationally, or internationally
  How (Introductory market strategy)–marketing mix (Kotler, 2009)
9. Post-launch/ Market Performance: by carrying out research in form of surveys, in-depth
interviews, focus group discussions.

Challenges in Product Development

For years, consumer goods companies excelled at innovation: the steady introduction of
profitable, convenient, high-quality products—ranging from disposable diapers to frozen
dinners—that changed the daily lives of consumers. Recently, however, these companies have
become increasingly vocal about the poor returns on their investments in product innovation.
More new products are being launched, but fewer of them are truly innovative paradoxically,
little has changed—and that's the problem for the consumer goods sector. As markets have
matured, tried-and-true processes for selecting ideas, determining business models, and making
investment decisions have become less productive. Existing methodologies have turned into
orthodoxies: established ways of doing business that reinforce the status quo and hinder the
adoption of novel, tailored, and flexible approaches to innovation. In defining "the way things
are done," these orthodoxies also dictate what a company should not do. And because they
represent deeply embedded mind-sets shaped by corporate tradition, culture, and values, they are
difficult to unwind.2
Product development is facing a fundamental challenge. Most companies are under pressure to
bring new products to market more and more quickly, and companies in many sectors must work
harder to ensure that they address the needs of ever-narrower customer segments. These
pressures are particularly acute in fast-paced markets, such as those for high-tech, medical, and
consumer goods, and in competitive markets for complex products that require large investments
and long development times, such as automobiles and airplanes.
The product managers have to do multitasking; reduce costs, increase growth, and respond
effectively to the fast-paced, highly competitive consumer goods market with new, consistently
successful products that are on target, on time, and on budget. Despite of being highly promising
and attractive the process of product development is very risky. There is no guarantee that every
time you come with a new or improved product or service it would be a success.
The most successful and legendry businesses have committed costly mistakes. One such example
is of New coke by Coca Cola Company. In 1984, Coke introduced "New Coke," a drink with a
slightly different recipe more intended to taste like Pepsi. In the blind taste tests, New Coke fared
very well and most people surveyed said they preferred New Coke over Pepsi. If this was the
case, how come when Coca-Cola launched the product, New Coke failed so miserably? It was a
complete disaster. There were protests around the country. How does a product that tested well
in market research ultimately fail when on the market? The answer is that you can't be all things
to all people. You can't use a sample market research group to test brand affinity. Brand equity is
a function of affinity, experience, and promotion overtime. Coke tried to be the "sweet" soda and
the consumers can see through that. They want the classic American taste and even though the
"New Coke" tastes different and possibly better, it still "feels" like it tastes better. It's all about
branding. The “brand love” for coke was so strong that the people did not accept the new taste.
The protests and push-back from the country was a result of Coke's up-sell agenda. People think
of Coke as an all-American company. When they start trying to change their image to appeal to a
larger audience, people start perceiving the "sell-out" persona. By selling out, it abandons their
core market of loyal drinkers, just like Mac users getting frustrated about the Intel chip in Apple
computers. The Coke loyalists don't want to feel like they are being capitalized on. No one wants
to feel like a company is abusing their loyalty by shoving unoriginal, copycat products in their
face.
On the other hand, new products are engines to growth and prosperity for many companies like
P&G. Procter & Gamble has always shown exceptional performance in product development.
The company is also considered as pioneers in developing new product category such as
disposable diapers, antidandruff shampoo etc. However, these successful product developments
are not accidental. It is result of a disciplined, systematic approach based on best practices.
Big giants like P&G, Unilever, Microsoft, Toyota motors who belong to developed economies
have plethora of resources at their disposal and commensurate R&D very successful. Our
discussion now focuses on to the issues of New Product development in developing country like
Pakistan.

Product Development Issues in Pakistan

In order to grow and survive in such a fast pace world of technology, any technology intensive
business needs to have the ability to bring new and relevant products into the market in timely
manner. Every project cannot be a success story however businesses learn from their mistakes
and move ahead. Therefore, companies should not be reluctant in initiating the task of innovation
and product development just because they fear failure. Companies like Engro foods encourage
and appreciate their employees even if they do not successfully meet the NPD task. At least it
whets their appetite to try and come up with innovate products and processes. Engro Foods
believes that the environment of fear from bosses can bring employees under psychological
pressure and minimize working capabilities, so fear factor should not prevail at offices.5
Siemens Pakistan also encourages and fosters creativity among its employees. They believe that
innovation in Product development is a recipe of success and growth and progress in Pakistan.4
Designing the product is usually seen as the responsibility of R&D departments, market
consultants and researchers in academia, whereas branding is seen as the responsibility of the
marketing departments. Traditionally, whenever a company required a new product they turned
to market research to discover ‘un-met latent needs’ among their customers. Once the need was
identified, the task of designing a new product to fit the need was handed over to the product
development team, and when the prototypes were ready these were handed over to marketing for
testing. However, new research has rejected these traditional methods of product design and
brand management by demonstrating that the majority of new product failures are the result of
ideas dreamed up by manufacturers, academic researchers or inventors in the lab. These ideas,
although attractive on the drawing board and in prototype, did not sell in the marketplace.4
Many companies fear to take risk and like to play safe. They had rather look upon someone else
to give a head start and they can then be the followers. Also big companies sometimes move
slowly, which is not good for financial health. Speed is the key factor in the world of
innovations; so slow moving businesses should open some new avenues to grow faster.
IT industry of Pakistan has a very challenging task. In order to stay one step ahead of the
competition, Pakistani IT/ ITeS companies need to constantly innovate and adapt to global
market trends. As the number of companies seeking to outsource and offshore increases, the
national IT/ITeS industry must keep its development and production costs low. There are a
number of ways in which this objective can be achieved. These include using reusable
components, technological leap-frogging to shorten development lifecycles, and focusing on
product platforms and derivative products/services. Any organization's effort to broaden its
product/service base has to be tempered by innovation, research and development. This fact
cannot be overemphasized enough in the IT arena; yet, at the same time, the capacity of
organizations to innovate may be constrained because of Resource exigencies. PSEB (Pakistan
Software Export Board) has entered into strategic alliances with leading national and
international organizations to provide adequate support to IT/ITeS companies operating in
Pakistan so that they may overcome these resource constraints. PSEB is also providing assistance
in identifying resources for private funding, as well as for public-sector finance programs.
Tea Industry has also faced certain PD issues and challenges. Tea is the second most popular
drink in Pakistan, after water. For Pakistanis, it is an integral part of culture and heritage. It is not
only a beverage but a food item for more than half of the population in Pakistan, who start off
their day with a cup of tea and “Roti” as breakfast. As a result, Pakistan is a leading tea
consumer in the world. The tea market is divided into two segments:
 Packaged (Branded)
 Loose (Unbranded)
Loose tea takes up approximately 28% of the market with the packaged tea accounting for the
remaining 72% of the market. The two major players of the branded tea are Unilever’s Lipton
and Tapal. Other players include Tetley, Brook Bond Supreme, Vital and Pearl Dust. In recent
years, the demand for tea has increased in Pakistan due to a number of reasons. This includes
changing consumer behavior, population growth and consumer awareness related to health
benefits of tea. Consumers are now faced with greater choice and availability of wide range of
options. They can choose between both branded and unbranded products. Loose tea has a larger
market share due to lower price, and is popular amongst the masses.
As with all other products, tea consumers have also become more discerning and well informed.
They are more interested in innovative and new products. For example, Lipton introduced
flavored tea in a bid to connect with the youth which was not successful. They felt that the youth

4
Riaz, N. “The New Innovators”. Aurora Magazine, 2011.
would like an innovative tea with flavor, packaged in an easy to use teabag. However, it was a
miscalculated move.
Similarly, Tapal’s iced tea failed to justify itself to its target market. One of the reasons for its
failure can be that the product was launched prematurely, since we have yet to associate with the
concept of iced tea that may be common in west but not so popular among our consumers.
Consumers are also becoming health conscious and are now aware of health benefits of tea
drinking, in particularly heart healthy properties. Thus Lipton has introduced the ingredient
Thiamine in their product that has fewer side effects and proclaimed to improve blood flow.
Sales of economy packs have also increased with the turbulent economic conditions. Some
specific issues related to new product development in tea industry are:
 Designing core products and augmentation – involve customers to succeed not NPD
teams.
When launching green tea, Tapal first identified an opportunity, as there was a market
that had a developed taste for green tea. They targeted the youth and the health conscious.
Attractive packaging also was a part of the deal for a contemporary product. However,
the company faces issues in R&D and studying market’s needs and demands. In the case
of iced flavored tea by Unilever, consumers were reluctant in accepting the new product.
The reason was that the company did not capture true consumer insight at the test
marketing stage. At times your consumers are the best judge instead of the NPD teams.
So it is more profitable to involve them in the concept testing stage.
 New product design – lengthy + Lack of professionals.
Blending takes up to five days in which eight thousand samples of tea are taken to ensure
a premium quality. Also there is a dearth of trained connoisseurs. Together these two
factors make formulating new tea blends a very risky, expensive and a time consuming
process.
 Deciding on number of SKUs and variants – deciding on right variants.
Tapal decides on the number of SKUs and variants according to the market needs. It has
come up with products to suit the taste of specific regions. For example, its “Mezban” tea
caters to rural Sindh. Similarly, “Tezdum” is for the Punjab market. “Tezdum” is stronger
in taste as compared to “Mezban” which is milder.
Understanding the consumers’ preferences and then developing a product that best caters to their
needs is very important for tea manufacturers, as it is a daily consumed household product.
Biscuit Industry does innovations in both product taste and packaging. The development of new
products and/or the extension of current product line have been a consistent part of the business
activity by biscuit manufacturers. This industry has experienced a constant flow or introduction
of new brands of biscuits with the elimination of some products as well. To introduce a
successful product or to launch a new variant requires quality research before the actual launch
of product. The key players in the industry (EBM, CBL) incorporate thorough research in their
NPD process since the inception of an idea to the final stage of launching a product mainly to
avoid product/brand failures.
CBL and EBM recently introduced a new product, ‘Nan khatai’ which was received well in the
market. Before launching, CBL did he research and also test marketed all the flavors. The most
successful flavors were then launched commercially. The issue in the development of Nankhatai
was the first mover war between CBL and EBM. Three months after CBL launched Bakeri
Nankhatai, EBM launched a standalone brand called Peak Freans Nan Khatai. EBM however
claimed that they came up with the idea first. the success of a new product also relies on who
entered the market first and who entered later.
Some of the specific issues of this industry are:
 Anticipating consumer’s response
This is related to determining whether the consumers are ready for the launch of a new
product or variant and their awareness levels. Since biscuits are not considered to be part
of staple food items, their consumption is not considered to be as necessary as that of
other food items. Therefore, customer response should be carefully anticipated and
analyzed to determine if the consumers are ready for the change to welcome a new
product in this sector. Consumer insights are also gauzed through a number of market
research techniques. Focus groups, blind tests or interviews are tools used by the
researcher that clarifies the customer’s needs and save company’s valuable resources in
development of failure products. When EBM planned to change the weight (in terms of
grams) for one of its most selling brands for the purpose of cutting costs it outsourced this
research to a marketing research firm. The firm conducted some blind tests with the
consumers of the same product and came up with the conclusion that change of gram-
mage has no effect on the product taste, freshness and crunchiness. This was a very
valuable and significant research for EBM.
However, while introducing “Cheers” in 2013, positioned as a healthy snack, EBM failed
to forecast the demand in volumes. The product was made available in three variants
targeting health conscious consumers from SEC A and B. Only one variant was accepted
while the others two failed because the taste was not liked by the consumers. Although
the marketing campaign and launch was very successful in creating awareness, but the
actual product did not work because there was no substantial demand.
 Capturing the voice of customers
This deals with the opinion of customers, their behavior and preferences. The increase in
awareness levels of consumers has also promoted the idea of individualism; people want
their own feelings and ideas to materialize. Consumer insight, over the years, has served
as the best guide for companies especially biscuit manufacturers in the impulse purchase
category. Oreo was launched by LU to satisfy the consumer demand of the brand in local
market since the premium segment was consuming imported Oreos in a significant
amount in terms of spending on biscuits.
 Assessing market situation
The concept and definition of the product, and the analysis of the pertinent scenario in the
market, falls under this category of issues in product development. This may also include
the economic conditions of the country such as income levels, disposable incomes and
standard of living. Income levels may determine pocket money for children across
various socio-economic levels.
 Concept Testing or Test Marketing
This deals with product testing and quality issues or implications. It should be in fact the
starting point of all product plans and strategies. Companies develop a new product
concept before adequately researching its attractiveness to the target buyers. The new
variant or product is usually tested before being formally launched. The testing may be
done through idea testing by discussing the idea with the consumers or by letting them
taste the product and then obtain their response and feedback. However, in products like
biscuits that can be easily copied, companies fear that the competitor will launch the
product before their product is actually out in the market. (refer to Nankhatai example
above).
Importance of test marketing can be understood by the example of “Mast” which was the
first branded NIMCO product introduced by Lakson Group of Companies. It was
designed to target SEC A and B in Karachi, sold at Rs. 10 (25 grams per pack). The
product was imported from India, hence the cost incurred was very high. The issue with
this product was the lack of research. In the test marketing stage, it did not prove to be
successful because it did not fit into the snacking habits of SEC A and B. These are the
people who munch on premium quality potato and corn chips and/or cookies. The idea of
a nimco product did not blend in. As a result, shelf offtake was very low. Finally, a
formal launch did not take place.
 Deciding on the number of Variants and SKUs
The number of variants and SKUs should also be decided in the development of new
products. While addition of more variants and SKUs has proved profitable for some
established brands but it may be risky venture for a totally new product6. It may be
decided on the basis of the target market the manufacturer wants to focus on. For
example; to cater to the needs of children or BOP consumers, the manufacturer may
introduce smaller packs (ticky-packs) or different flavors.
“Prince” biscuit or “Rio” is available in different creamy and chocolate flavors to cater to
the taste and preferences of younger generation. Rio Mango was launched as a new taste
for kids who are constantly bored with old offerings.
The biscuit industry launched a new SKU, mini half-rolls as the companies wanted to
migrate the consumers from paying Rs. 5 (for a ticky pack) to paying Rs. 15 (half rolls).
However, it was realized that a lot of consumers (especially SEC B and C) cannot make
this transition due to affordability issues hence, a new SKU “mini-half rolls” also known
 as snack pack was launched for Rs. 10. Consumer insights suggested another reason for
the introduction of this SKU. For people who consume biscuits on the go, ticky pack is
not fulfilling but a half roll is too much and result in left overs. An SKU in between could
solve this problem. All these SKUs are consumed in different occasions. For example, a
half roll is more likely to be consumed when there are guests in the house or at tea time
when the family sits together to have a snack.
Currently, the biscuit industry has the following SKUs with these prices: ticky packs (Rs.
5), Mini half-rolls/ snack packs (Rs. 10), half rolls (Rs.15-17), family roll (Rs. 30-35).
Ticky packs and half rolls are also available in dispensers (boxes of 12/24 packs).
 Cost/ price
The manufactures have experienced an increase in costs due to the rise in prices of key
ingredients for biscuits such as flour, butter and sugar. The increase in costs has forced
the manufacturer to raise their prices. The biscuit consumers experienced this price
increase after 8 years yet still the consumers retaliated and did not welcome the change.
The increase in prices led to a drastic decrease in sales (about 40%-50% in some cases)
and the industry is still in the recovery stage. The manufacturer cannot easily transfer any
impact of increase in costs to consumers (in terms of price increase) mainly because
biscuits are considered to be a luxury item not a necessary food item. Thus consumers are
not willing to pay a high price for it. Unless the whole industry does not increase the
price, the individual manufacturer cannot alone exert influence over the price. Promotion
and advertising costs are also increasing; hence pressure is on biscuit manufacturer.

Changes in Market Environment affecting NPD

1. New Ways of Reaching Customers:
In mid-1990s, the internet replaced interactive television as the “hot medium” of the decade. Any
company not having a website was considered outdated by 1996. Such was the power of this new
IT revolution. The main advantage of the web for product managers was the ability to customize
messages, services, and products to the users of website. In Pakistan the penetration of internet
has also increased dramatically. Companies are using new mediums for advertising to reach the
customers anywhere anytime, such as Facebook and Twitter. The revolutionary E-commerce is
replaced by M-commerce. In addition to the internet and mobile, the increase use of direct
marketing, telemarketing and cable/satellite, plethora of radio channels and BTL activities are all
new milestones in communication. Within 5 years, the country has witnessed a great shift from
E-Commerce to M-commerce. All this has made the task of product manager’s job of selecting
alternative modes of communication more complex.
2. The Data Explosion:
Effective marketing requires sophisticated information management. For consumer packaged
goods companies, this means better and timelier information on market shares, sales and
distribution due to proliferation of scanners in the market. Almost all products sold by through
the modern retail system are more effectively tracked by both the retailers and the manufacturers.
In Pakistan, Retail Audit is being done by AC Nielson which keeps track of retail buying
behavior. The data can be purchased by companies and is very useful in designing products that
are most in demand by their consumers. Similarly, Aftab associates have entered into agreement
with Brand tracking system that keeps check on the health of the brands. Through this
information, companies can develop products tailored to specific need of their target markets.
3. Shortened Product Lifecycle:
A key phenomenon in technology based industries and many others is the shortening of PLC.
The time it takes for most of the product categories to reach maturity has been reduced by
increased rates of innovation among increased number of competitors. Product managers are
under immense pressure to extend their brand lifecycle by repositioning, changing features,
looking for new uses or developing other ways to extend the period in which profits can be
generated. Recently, National foods have completely changed the packaging of all its products
and gave them more appealing and contemporary look. Similarly, Olper’s changes its packaging
seasonally, especially in Ramadan, where they try to associate Olper’s as a necessary table-cloth
item.
4. Increased Power of Sellers:
In the middle of 1980s, the manufacturers had an upper hand in dealing with retailers. They also
had an edge because of the access to data. Today, both parties have an access to data regarding
sales and market share. Also because of the proliferation of products, the balance of power has
shifted from manufacturers to the retailers. Retailers are now treated as key customers by the
manufacturers and it is as important as being close to the end customer.
5. Increased Importance of Customer Retention Programs:
The concept of lifetime value of customers is becoming more and more important. Companies
find it more profitable to invest in old customers rather than the habitual brand switchers.
Product managers therefore have to pay more attention to after sales service and complaint
management system. Blogging is an upcoming trend in Pakistan, and it easily generates word-of-
mouth among peer groups. Also, people do not hesitate to report their complaints on Facebook
pages and groups, where it generates a negative image that can easily spread. Thus, customer
retention is very important. Capri, when initiating the soft launch of their hand-wash and face-
wash range, provided free samples to beauty bloggers and told them to share their experience on
their own blogs as opinion leaders.
6. Some Global Challenges in Product Development:
A complication in today’s environment is that projects are typically managed and staffed on a
global scale. Also, in many cases, companies need to work with outside partners and institutions
in successful development of new products. Nurturing a project culture in a global environment,
where team members are separated by geographic, cultural, and organizational boundaries can be
a huge challenge. This is where some of the emerging collaborative technologies (like social
networking, high-definition video, unified communications, security, and so on) hold significant
promise. Many companies today are experimenting with these technologies to see if they can be
applied to improve the effectiveness and efficiency of the product development process. We are
witnessing the transformation of how new products are developed and brought to market. It can
be rightfully said that we are experiencing exciting times indeed with lots of opportunities as
well as challenges.

Possible Reasons of NPD failures

1. Failure to understand consumer needs and wants Fixing a non-existent Problem
2. Targeting the wrong Market Incorrect pricing
3. Weak team and internal capabilities
4. Prolonged Development or Delayed Market Entry Poor Execution

How to Achieve Success in NPD?

1. Keep it focused
Whenever project requirements are clearly defined and communicated to teams before kickoff,
the project has a greater chance of success. Employees who have performed well and are part of
successful product development projects have a clear view of the project's scope from the
beginning, compared with those working in highly centralized command systems.
The term “new product process” means those steps, activities and decision-points that new
product projects follow from idea to launch and beyond. A word of caution here: According to
the study conducted, the mere existence of a formal product development process showed no
effect on performance; there was no correlation at all between merely having a process and
performance results. So those companies that mistakenly believe they can only “go through the
motions” and re-engineer their new product processes are in for a big disappointment. Having a
process does not seem to matter; rather it is the quality and nature of that process—building in
best practices—that really drives performance. The teams with a clear understanding of project
requirements appear better able to make trade-offs between product performance and things like
cost, time to market, and project risk. One reason for product failure is that members involved in
the project lack necessary information to make these decisions. Also selection of the right kind of
people as team members is integral to successful product development. This may be due to fact
that all the members also share the same level of enthusiasm and it is a win-win situation for all
the stake holders.
2. Nurture a project culture
Many businesses lack defined, clear and written goals for their total new product effort. In
contrast, top-performing companies such as 3M, that have stories of successful product launches,
nurture a strong project culture by making product development a priority. 3M, by way of
example, has a clear direction towards NPD and makes goals like: “30 percent of our division’s
sales will come from new products introduced over the next three years” an explicit part of every
division’s business goals. Similarly, Engro Corp is a company locally famous for its new product
launches. Engro has a project based focus and approach towards product development and its
employees are encouraged to come up with innovative ideas.
Far too often, in businesses, the people who work on new product projects are not aware of their
business’s new product objectives, or the role that new products played in the total business
objectives. In order to align NPD efforts with the business objectives, businesses need to design
a new product strategy. Those businesses that lacked goals for their total new product efforts—
where arenas or areas of strategic thrust had not been defined, where the strategy and projects
were short-term in nature, and where the strategy was not well-communicated—were at a
decided disadvantage in terms of new product performance.
3. Talk to the customer – Market Research!
82% of all new product launches in the USA failed in 2009 because they were products that
consumers could see no real need for. In UK, the research industry is a billion-pound industry,
then why is it that the marketers globally are unable to identify what the consumer wants? Often
times, the marketers do not ask the right questions to gain that valuable consumer insight. As a
result of the digital revolution, the consumer can be, even should be, an active participant in the
four P’s of marketing – in helping to create the product then place it, price it and promote it5.
Successful innovators keep in close contact with customers throughout the development process.
All high achievers periodically test and validate customer preferences throughout the
development process. They are also transfixed on researching what customers want. That made
them better able to identify and fix design concerns early on, minimizing project delay. Such
practices also allow the team to fine-tune the product well before launch.
The above mentioned successful product development practices have their flaws and are open to
debate. One such argument is that the most successful new products that come to mind over the
last decade include a well-known Web search portal/engine, a portable music player, a touch
screen smart phone, a DVD by mail service (now morphing to on-demand Internet delivery), a
social networking site, a micro blogging site, and a personal digital video recorder
complemented by a network-based
scheduling and recommendation service. They each would appear to violate these principles in
clear ways. And, their success is more than survivorship bias, as some of the firms involved
demonstrate a track record of market-leading innovation.
Perhaps equally as successful as “keep it focused” is luck; in opposition to “project culture” is a
strong and visionary leader; and instead of “talk to the customer,” innovation often requires
overturning or ignoring stated customer beliefs regarding their needs and preferences. Apple, by
way of example, is a case-in-point where the leadership believed the consumer to not know what
it really wants. “A lot of times, people don’t know what they want until you show it to them”
said Steve Jobs6. However, it is imperative to remember that Jobs was talking about the very
narrow category to which he aspired: where his products, such as the Mac, iPod, iPhone and
iPad, either redefined or created product categories. That’s not the domain in which most
businesses play. Metrics such as being on-budget and on-time do not necessarily equate to
innovation leadership, and ROI and employee satisfaction metrics are not necessarily correlated
with innovation metrics such as percentage of revenues from products introduced in the last 3
years.

Consumer Behavior and NPD

As a marketer, it is important to understand why a consumer opts for one product over another.
New product selection depends on various factors such as life stage, family dynamics, etc.
important macro trends have been highlighted by AC Nielsen in its New Product Innovation
Study, 2015. These top new product purchase drivers are:
1. Affordability
2. Convenience
3. Brand Recognition
4. Novelty
Based on these drivers, AC Nielsen suggests manufacturers and companies to utilize this
understanding and do the following:
1. Get the Price right
According to AC Nielsen’s study, globally, affordability tops consumers’ list of reasons for
purchasing a new product, but there are regional differences in the order of importance placed on
this attribute. In Asia-Pacific, affordability is the third most important reason for purchasing a
new product, behind value and convenience. North Americans place affordability second on their
list, behind novelty and tied-with brand recognition. In Latin America, affordability is just
slightly behind brand recognition as the reason for making a new product purchase. When it
comes to the new products consumers wish were available but are not currently, products at
affordable prices are the most desired in all regions—by a wide margin. Forty-three percent of
global respondents say they wish more affordable products were available (AC Nielsen, 2015).
2. Make it Convenient
Based on the AC Nielsen study, it can be concluded that shoppers want products that help restore
balance and free up time to do the things thy value most. More than one-fifth of global
respondents (22%) say they purchased a new product because it was convenient, and slightly
fewer (19%) say they purchased it because it made their life easier. Consumers’ desire for these
kinds of products is even higher. More than one-quarter of global respondents say they wish
more products were available that make their life easier (27%) and are convenient to use (26%)
(AC Nielsen, 2015).
3. Leverage the Brand Power
A brand name can be one of the most valuable assets a company possesses. It can lend credibility
to product efficacy and provide an assurance of quality, letting consumers know what they can
expect when they buy a product. But brand building can be costly and time consuming, so the
ability to grow via line extensions can be extremely advantageous. Line extensions are
approximately three to four times more common than “new manufacturer” and “new brand”
launches combined. For consumers, line extensions create confidence in a new product’s ability
to deliver against promises. Nearly six-in-10 global respondents (59%) of the AC Nielsen study,
prefer to buy new products from brands familiar to them, and 21% say they have purchased a
new product because it was from a brand they like.
The study also found that brand recognition is particularly influential in developing markets. On
average, more than two-thirds of developing-market respondents (68%) say they prefer to buy
new products from brands that are familiar to them, compared with 57% in developed markets.
In addition, more than one-fifth of developing-market respondents (22%) say they purchased a
new product because it was from a brand they like, compared with 17% in developed markets
(AC Nielsen, 2015).

Conclusion
Product development and market research go hand in hand. A NPD without a comprehensive
research study is never likely to be successful. Any new product should be launched very
carefully because failure of products sometimes hurt the Brand Equity of a firm. It is therefore
important that a post launch research study should be carried by companies. Researcher should
carefully measure the interest and liking of the consumers. Products that succeed in getting share
of the customers’ hearts, minds and wallets add to the goodwill and prestige of the company and
ultimately support the future product development plans.
Finally, the products should also be in compliance with the ethical and socially responsible
practices. One such example is of National Foods Ltd. After the ban on certain food colors that
were not fit for human consumption the company 100% abstains from using non permitted food
colors. History tells us that companies who have ignored social responsibility, have been
involved in unethical product development practices or polluted the environment have caused
catastrophic harm to companies’ good-will and equity.
References

1. AC Nielsen. (2015). Looking to Achieve New Product Success? Listen to your

Consumers. AC Nielsen.
2. Cupman, J. (n.d.). Using Market Research for Product Development. B2B International.

3. Feloni, R. (n.d.). Business Insider.

4. Kotler, P. (2009). Marketing Management: A South Asian Perspective.

5. ESOMAR. (2014). GLOBAL MARKET RESEARCH 2014. Retrieved from

https://www.esomar.org/web/research_papers/industry-reports.php?id=2635

6. Statista. (n.d.). Retrieved from The Statistics Portal:

https://www.statista.com/topics/1293/market-research/

7. “The path to successful new products”. Mckinsey Quarterly 2010 • Mike Gordon, Chris
Musso, Eric Rebentisch, and Nisheeth Gupta.

8. “Reinventing innovation at consumer goods companies” McKinsey Quarterly November

2006 • Erik A.

9. Roth and Kevin D. Sneader.

10. “Pfizer’s Tocetrapib Failure: The Risks of New Drug Development”

11. “Do not give up innovation for fear of failure”. By Salman Siddique.The News.
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12. “Product development blues”. Prof. A.G Sayeeed. Marketing Review 2nd Qtr 2004.