New Product Development for Dabao Cosmetics Co, Ltd

By | April 19, 2014

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Content page

List of figures, charts and tables………………………………………………………………………… 2

Executive summary………………………………………………………………………………………….. 3

  1. Introduction of new product development……………………………………………………. 4
  2. Engagement objectives………………………………………………………………………………. 4
  3. Literature review……………………………………………………………………………………….. 5
  4. Case analysis of Dabao Cosmetics……………………………………………………………….. 7

4.1      Situational analysis…………………………………………………………………………… 7

4.2      Consumer behavior analysis………………………………………………………………. 8

4.3      Product planning……………………………………………………………………………… 9

4.4      Marketing objectives and positioning………………………………………………… 10

4.5      Promotional mix…………………………………………………………………………….. 10

4.5.1     Advertising…………………………………………………………………………… 11

4.5.2     Sales promotion…………………………………………………………………….. 12

4.5.3     Public relations……………………………………………………………………… 12

4.6      Implementation and control framework…………………………………………….. 13

  1. Concluding remarks…………………………………………………………………………………. 13

Reference list………………………………………………………………………………………………… 14

List of figures, charts and tables

 

Figure 1.0 Ansoff (1957)’s matrix of options for growth………………………………5

Figure 2.0 The life cycle of a product…………………………………………………6

Table 1.0 Differences between IMC and a traditional views………………………….7

Table 2.0 Situations in which advertising is more favorable…………………………11

 

 

 

Executive summary

 

This study could be divided into three major parts. It begin with an introduction of the  new product development in term of basic concepts and definitions to help the reader clarify some fundamental knowledge; the second part of this study is attributed to a theoretical analysis of the brand building of new product though Integrated Marketing Communications (IMC); the last part of this study focuses on a case analysis of New Product Development for Dabao Cosmetics Co, Ltd by following a model that has been provided in the theoretical review to show a whole market communication plan in a practical scenario and this part of study ends in giving a feasibility and restrictions analysis of the new proposed brand.

 

 

1.        Introduction of new product development

 

Regardless of operating size, organizations are constantly interesting in developing new products. One of the major characteristics and initiatives of having a new product or service lies in the ability to satisfy stated or implied need of customers (Yang, EI-Haik & El-Haik 2009). And New Product Development (NPD) could be defined as the stage of the product innovation process in which the actual product development activities happen based on the product concept (Sandmeier 2006, p19). Concepts may be complicated and confusing, but the basics of new product development is simple as Aristotle said once that “There are many possible to fail…while there is only one way to succeed”. Aiming at achieving the most valuable success, companies focus on the new product development persistently because the possible success of a new product provides such attractive benefits in term of being a source of competitive advantage, offering opportunities for reinforcing or changing strategic direction, leveraging brand equity and capitalizing on Research and Development (R&D) and so on (Thomas 1993).

 

2.        Engagement objectives

 

To provide a theoretical understanding of new product strategy

 

To apply the concepts of new product development (NPD) in the case analysis

 

To build branding of the new product using Integrated Marketing Communication

 

To assess the feasibility and restrictions of NPD for Dabao Cosmetics

 

 

 

3.        Literature review

 

According to Ansoff (1957)’s matrix of options for growth, with a company’s current product mix and the match between the company’s overall marketing objective and the current offering, there are four major identified development strategies as shown in the figure below: Market Penetration, Product Development, Market Development and Product Diversification. And the product development strategy refers to the introduction of new products into identifiable or established markets (Kurtz, MacKenzie & Snow 2010). So the new product development of a company should be in accordance with its overall corporate and marketing strategy.

Figure 1.0 Ansoff (1957)’s matrix of options for growth

 

As mentioned in the beginning, there are various benefits along with the new product development such as being a source of competitive advantage, offering opportunities for reinforcing or changing strategic direction, another evidence comes from the Product Life Cycle (PLC) theory which best explain Aristotle’s words as mentioned above. The Product Life Cycle (PLC) theory suggested that a whole product cycle would go through four stages: introduction, growth, maturity and decline. And the  Product Life Cycle begins with the new product development in the introduction stage which is seldom an immediate success with low customer awareness and acceptance of the product which requires further efforts in promotion, distribution and R&D investment to put the product into the next stages to generate anticipated profits if it proves to be a success. So even with high risks in the new product development, it is the “only way” to succeed.

Figure 2.0 The life cycle of a product

Source: Pride & Ferrell 2010

 

Some studies find out that the failure rate of new products averages as high as 80% (Kurtz, MacKenzie & Snow 2010). A typical NPD process usually includes eight stages that have been identified to guide the new product planning to increase the long term viability of the growth of the companies: idea generation, idea screening, concept development and testing, marketing strategy development, business analysis, product development, test marketing and commercialization.

 

In order to build up the branding of the new product, Integrated Marketing Communications (IMC) which could be defined as the planning in a systematic method to determine the most effective and consistent message for the selected target audiences (Percy 2008, p328) could be adopted to enforce the impact and effect of the marketing communication. Another definition of IMC proposed by Duncan and Everett (1993) referred IMC as “the strategic coordination of all messages and media adopted by a company to influence its perceived brand value”, this definition actually clearly stated the importance of IMC to building up the brand of a product. IMC is different from traditional marketing communications which is shown in the table below.

 

Table 1.0 Differences between IMC and a traditional views

Source: Masterman & Wood 2006, P6

 

Various models of communications planning have been developed by many researches and studies, and these models tend to based on the framework that contains the following key elements: context (situation) analysis, marketing objectives and positioning, marketing communication strategy, promotional mix, implementation and monitoring performance (Fill 2002). Below the case analysis will be unfolded using this framework.

 

4.        Case analysis of Dabao Cosmetics

 

4.1    Situational analysis

 

Dabao Cosmetics since its establishment in 1985 with its vision of “simple and pragmatic” has been leading the domestic cosmetic industry in term of face cleansers, skin moisturizers, day cream and nigh cream and so on. The Social Survey Institute of China (SSIC) has ranked Dabao Cosmetic the no.1 of the top 10 Chinese cosmetic brands for many years (Ssicgov.cn 2010). Since 1990s by the release of the Dabao SOD series cosmetic products originated from Dabao’s own SOD (Superoxide Dismutase) bio technology by its R&D effort which had been widely recognized by the government or other research institutes, Dabao has been focusing on providing medium quality cosmetic products and skin care service with lower prices to the working class, the middle to lower end in the cosmetic industry. By adhering to this marketing strategic positioning, Dabao has been a successful example for the domestic industrial competitors to follow for almost 20 years. But the current market trend has required the company to perform a strategic change to focus more on the middle to high end of the market if the company want to keep its growth. According to a recent research called “Cosmetics and Toiletries Market in China” (RNCOS 2010), while the overall cosmetic and toiletries industry maintain a fast growth the skin care segment is expected to lead this growth trend with an anticipated year-on-year growth rate of 12.7 during 2010 to 2013 to accounting for 40% of the market share of the industry. And the premium market sub-segments will be providing the major growth momentums. Now provided by the various research results that indicates the similar conclusions, it is a chance for Dabao Cosmetic Co, Ltd to release its own middle to high end products under a new branding because the existing Dabao brand has been recognized widely as a low end cosmetic brand though it is famous, so the new product development will be necessary to help the company to keep its growth.

 

4.2    Consumer behavior analysis

 

Consumer behavior analysis is the use of behavior principles, usually gained experimentally, to interpret human economic consumption (Foxall 2002). It is important to any companies that are in a competitive market to observe the consumer behavior trend to seize the opportunities from the major changes happened to the consumer behaviors. And the study in this field has more implication to the new product development. Back to the case of Dabao Cosmetics Co, Ltd, when it comes to Chinese domestic cosmetic product, any player in it need to watch closely the consumer idea and behaviors which undergo fast changes during same fast economy growth together with dramatic social and cultural changes. According to a recent market research (Ssicgov.cn 2010), in the low end market, Chinese consumers are not frequent buyers of cosmetic products due to the limitation of purchasing power; in the middle end, consumers have stable income and are demanding for the effectives of the cosmetics products and public known middle end brands are their favorite; and in the middle-to-high end market, the Chinese consumers in this level are demanding both high quality product and high class brands, with more than 800 CNY annual average consumption these consumers are willing to buy the domestic brands as the survey also indicated that consumers in this market segment tend to has the history of gathering fortune through their own hard work, so they tend not to be discriminating the domestic products; but in the high end market, this discrimination is obvious and significant because many of the consumers in the market segment are the young generation with a lot of fortune inherited from the older generations, so foreign famous and world class brands are their only choice while the domestic brands would not fall into their buying list.

 

4.3    Product planning

 

Based on the situational analysis and consumer behavior analysis we have above, suggestions could be given the Dabao Cosmetics Co, Ltd that it has to develop a new skin care product brand that is different from its previously cosmetic product that has been widely accepted as cheap with good quality and can be used by all age groups. To create a new brand, Dabao Cosmetics Co, Ltd need to set up a new product development process beginning with more investment in the R&D effort to develop appropriate technologies that could be used in the production of high to medium class face care cosmetic products. As mentioned above, SOD technologies has long been the source of the company’s core competitive as most of its best selling products are based on this technology. In this point, it is advisable to continue the R&D effort base on this technology and try to upgrade it into a more advanced technology. And the new technology need to be differentiated from its original SOD technology and based on this technology new series of product could be developed. The basic product concept is to provide high quality face care function that is comparable to the world class cosmetic brand but with lower cost which set the base for the company to price the new products in a lower level to penetrate the middle to high end market. What’s more the marketing plan should be clearly separated from the original brands to avoid assumed connection by the customers to the original low end brands.

 

4.4    Marketing objectives and positioning

 

The Chinese middle to high end cosmetic market is known as highly competitive and is mainly dominated by the foreign giant cosmetic brand such as Lancôme and Avon. By aiming at the middle to high end market and positing at the high and middle income classes, the marketing objective of the new product under the new branding in term of communication objectives could be set in brand awareness, response rates, personal recommendations and etc. For example, in term of brand awareness, Dabao Cosmetics Co, Ltd could set the target to reach 70% among the target customers and relative stakeholders in the end of 2013.

 

4.5    Promotional mix

 

Even for a sole brand, consumers are exposed to different types of market communications from it such as personal selling, public relations and sale promotions. When conflicting messages are sent out to consumers from different market communications, consumers can be confused about the brand positioning of the products. And Integrated Marketing Communication (IMC) provides just such solutions to this problem by coordinating the different messages to be delivered to the consumers in a consistent manner to promote the desired image of the product and brand (Trehan & Trehanp 2010, 52). Please notice that the following promotional mix options would be more than the three that have been discussed below.

 

4.5.1            Advertising

 

Promotion and advertising are the two most important options in the promotional mix, and like Percy (2008, 328) suggested, it is never a question whether we should use advertising or promotion, the question should be whether we should use more promotion or use more advertising since they are both important and critical to the companies. And in the perspective of Integrated Marketing Communications (IMC), this trade off should follow the principle of maximizing the marketing influence and impacts. For the case of new brand promotion in Dabao Cosmetics Co, Ltd, it is advisable that it put more focus into the advertising to propose its product and brand in the market especially in the initiative stage when the people need more mass communications to get to know the brand. This advice also corresponds with the Trehan & Trehanp (2010)’s finding that advertising should be given more importance under some situations which has been demonstrated in the table below.

 

Table 2.0 Situations in which advertising is more favorable

Quick communication
Communicating masses
Messages to be communicated is simple
When product is branded
Products are differentiated
Consumers are scattered

Source: Trehan & Trehanp 2010, p53

 

In term of media selection, traditional media such as new paper, magazine, TV are stilling dominating the media to be used most heavily while the new media such as internet has provided increasing market chance in term of brand exposure.

 

4.5.2            Sales promotion

 

Sale promotion is an important promotional tool that could be very effective if used in the right time in a appropriate manner. By reviewing the consumer behavior analysis that we have above because middle to high end cosmetic product consumers tend to be demanding both product and high class brands, if Dabao Cosmetics Co, Ltd used the sale promotion too frequently the consumers may consider the new brand as a middle to lower end brand which make they not so interested. So suggestion in this point is that Dabao Cosmetics Co, Ltd should use the sales promotion in a very prudent and careful manner that it could even use it in a delayed time after the release of sale promotion of the major competitors in the important festivals that could help create the impression that the new brand is forced to follow the sale promotion technique that has been used by the competitors.

 

4.5.3            Public relations

 

To discuss the public relations of the new brand, we have to first review some facts relating to the history of Dabao Cosmetics Co, Ltd in term of the great charity contribution by the company from the very beginning of the company as a so called welfare firm under the Beijing Municipal Bureau of Civil Affairs. Under the guidance of the corporate vision and doctrine that has been widely accepted as the core of the corporate culture, “help the minority” and “care for the environment” have been the two major themes of the company’s charity efforts. So though it is advisable that Dabao Cosmetics Co, Ltd use a new marketing plan for the new brand to differentiate from the existing brands because of their different marketing positions, it is still recommended that the company adopted similar public relations in term of charity filed to create a consistent corporate image in the society.

 

4.6    Implementation and control framework

 

In term of the implementation and control of the Integrated Marketing Communication (IMC) plan, though it is not the focus of this study, in a practical situation the Dabao Cosmetics Co, Ltd still need to have careful implementation and control framework to regularly examine the effectiveness of the IMC plan in fulfilling the marketing objectives according to the timeline and one important suggestion is that target must be achievable with time bound.

 

5.        Concluding remarks

 

According to the theoretical, situational and consumer behavior analysis we have above in this study though in a quite brief manner, there is still enough of evident to prove that the new middle-to-high end brand to be released by Dabao Cosmetics Co, Ltd which has been widely accepted as a successful example in the middle to low end cosmetic industry in China is feasibility, but there are still risks to be tackled by the company. One very important uncertainty comes from the actual recognition by the consumers in China of the new brand as middle-to-high end product because there is never before a famous Chinese brand that could reach thus far. What’s more, though with well prepared plan, risk of failure may still exist as we quote Aristotle as saying that that “There are many possible to fail…while there is only one way to succeed”, failure may not be avoided in some cases, but following a good framework of new product strategy will certainly reduced the chance of failure.

Reference list

 

Ansoff, I. 1957, Strategies for Diversification, Harvard Business Review, September-October: 113-24

 

Duncan, T. R. & Everett, S. E. 1993, Client perception of integrated marketing communications. Journal on Advertising Research, 33, May/June, 30-39

 

Fill, C. 2002, Integrated Marketing, Communications, Butterworth-Heinemann

 

Foxall, G. R. 2002, Consumer Behaviour Analysis: The behavioural basis of consumer choice, London and New York: Routledge

 

Kurtz, D. L., MacKenzie, H. F. & Snow, K. 2010, Contemporary Marketing, Second Edition, Toronto: Nelson Education

 

Masterman, G. & Wood, E. H. 2006, Innovative marketing communications: strategies for the events industry, Oxford: Elsevier’s Science & Technology, P6

 

Percy, L. 2008, Strategic Integrated Marketing Communications, 1st Edition, Chennai: Elsevier Inc, p328

 

Pride, W. M. & Ferrell, O. C. 2010, Marketing: Concepts and Strategies, 15th edition, Mason: Cengage Learning

 

RNCOS 2010, Skin care segment will drive Chinese cosmetics market, accessed on 2nd Jan 2010 [Online] available: http://www.cosmeticsdesign-europe.com/Products-Markets/Skin-care-segment-will-drive-Chinese-cosmetics-market-RNCOS

 

Sandmeier, P.  2006, Customer Integration in Industrial Innovation Projects, 1st edition, Frankfurt: Gabler Verlag, p19

 

Ssicgov.cn 2010, 2010国内化妆品前十排行榜 (2010 Domestic Top 10 Cosmetic brand) , accessed on 2nd Jan 2010, [online] available: http://www.ssicgov.cn/

 

Trehan, M. & Trehanp, R. 2010, Advertising and Sales Management, New Delhi: V. K. (India) Enterprises, p53

 

Thomas, R. J. 1993, New product development: managing and forecasting for strategic success, New Jersey: John Wiley & Sons. Inc

 

Yang, K., EI-Haik, B. S. & El-Haik, B. 2009, Design for Six Sigma: A Roadmap for Product Development, 2nd edition, New York: McGraw-Hill