Stage 5- Business Analysis

The New Product Development Process

Stage 5- Business Analysis

The New-Product Development Process (NPD) is outlined above by Kotler & Keller (2012).

Business analysis is a very important stage of the NPD process because it is the final stage of assessment before deciding whether or not to develop the idea into a product. The primary focus of this stage is to determine whether the product will be profitable or not. Therefore the business analysis stage “will help you determine the costs involved in your proposed NPD, and forecast the profits you may make from the product in future financial years. The costs of developing a product are substantial. Your business analysis will also help you eliminate inappropriate ideas and avoid unnecessary costs.” (Business.qld.gov.au, 2014).

Considerations in business analysis include; demand, cost, sales and profitability (Lamb, Hair & McDaniel, 2009).

Demand: This relates to the products market size and potential. Price/sales relationship: speed of sales growth, seasonality and rate of repurchase.

Cost: The cost to produce the product including start-up costs vs. running costs.

Sales: Forecast sales volume. The number of people expected to buy the product- market share.

Profitability: Time to recoup initial costs. This is a direct outcome of the considerations above.

Example of Business Analysis


Onez Sports Center is the name of a proposed futsal center located at the University Terengganu in Malaysia. Business analysis has been done for this futsal center; this analysis outlines the four considerations mentioned by (Lamb, Hair & McDaniel, 2009).

Demand	The target market is the students of the university. (10,000 students in total).
Cost	(See Appendix A for Breakdown of Operational Cost) Start-up costs RM85,000, operational costs RM14,395 pcm
Sales	Market share will be divided with the competitor (UMT court which provides free futsal services).
Profitability	The business analysis states that the facility will be profitable so the start-up and operational costs which is RM99,395 will be reimbursed.

Quick Baseball

In relation to my new sports format- Quick Baseball I have researched the considerations mentioned by (Lamb, Hair & McDaniel, 2009). 

For demand I have researched the current market size of Major League Baseball (MLB) whom will be my main competitor and hopefully Quick Baseball will have a similar market size to the MLB which is 5,293,083 on average for all teams in MLB. (Baseball-almanac.com, 2014).

The cost of attending a Quick Baseball game will be considerably lower than the cost to attend an MLB game. I plan to price tickets 40% cheaper than current prices for MLB. An average ticket prices will be $15.

In terms of sales; these low ticket prices should see similar attendance figures to MLB fixtures. Average attendance for the 2014 MLB season was 30,450. (ESPN.com, 2014) (See Appendix B for MLB attendance figures).


By taking cost and sales of Quick Baseball into account, it will be hugely profitable. 58 games will take place during the season. If attendance figures are the same as attendance figures for MLB $26491500 profit will be made through ticket sales alone.

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References

Baseball-almanac.com, (2014). Baseball Markets by Al Streit. [online] Available at: http://www.baseball-almanac.com/articles/baseball_markets.shtml [Accessed 4 Dec. 2014].

Business.qld.gov.au, (2014). Business analysis of new products | Queensland Government. [online] Available at: https://www.business.qld.gov.au/business/business-improvement/new-product-development/strategy-analysis-new-products [Accessed 4 Dec. 2014]

ESPN.com, (2014). 2014 MLB Attendance - Major League Baseball - ESPN. [online] Available at: http://espn.go.com/mlb/attendance [Accessed 4 Dec. 2014].

Kotler, P. & Keller, K.L. (2012) Marketing Management. Global Edn. Harlow: Pearson Education

prezi.com, (2014). BUSINESS PROPOSAL : FUTSAL CENTER. [online] Available at: https://prezi.com/cgfym15tdfjx/business-proposal-futsal-center/ [Accessed 4 Dec. 2014].

Appendix

Appendix A- Breakdown of Cost, Onez Sports Centre

(Prezi.com, 2014)

Appendix B- MLB Attendance Figures

2014 Attendance		Home				Road			Overall
RK	TEAM	GMS	TOTAL	AVG	PCT	GMS	AVG	PCT	GMS	AVG	PCT
1	LA Dodgers	81	3,782,337	46,695	83.4	81	33,830	79.2	162	40,262	81.6
2	St. Louis	81	3,540,649	43,711	99.4	81	32,022	74.4	162	37,867	87.0
3	NY Yankees	80	3,401,624	42,520	85.7	81	35,512	85.2	161	38,994	85.5
4	San Francisco	81	3,368,697	41,588	99.2	81	32,936	72.7	162	37,262	85.5
5	LA Angels	81	3,095,935	38,221	84.2	80	28,174	65.1	161	33,229	74.9
6	Boston	81	2,956,089	36,494	98.5	81	31,867	73.6	162	34,181	85.1
7	Detroit	81	2,917,209	36,014	87.3	81	28,800	68.0	162	32,407	77.5
8	Milwaukee	81	2,797,384	34,535	82.4	81	32,328	75.6	162	33,432	79.0
9	Texas	81	2,718,733	33,564	68.3	81	27,155	64.3	162	30,360	66.4
10	Colorado	81	2,680,329	33,090	65.5	81	31,659	71.2	162	32,375	68.2
11	Chicago Cubs	81	2,652,113	32,742	79.6	81	33,096	76.4	162	32,919	77.9
12	Washington	81	2,579,389	31,844	76.7	81	29,864	68.8	162	30,854	72.6
13	Baltimore	80	2,464,473	30,805	67.8	81	29,671	70.4	161	30,235	69.0
14	Cincinnati	81	2,476,664	30,576	72.3	81	32,140	74.1	162	31,358	73.2
15	Pittsburgh	81	2,442,564	30,155	78.6	79	33,316	76.1	160	31,715	77.3
16	Philadelphia	81	2,423,852	29,924	68.6	81	31,136	71.1	162	30,530	69.9
17	Toronto	81	2,375,525	29,327	59.5	81	29,708	71.2	162	29,518	64.9
18	Atlanta	81	2,354,305	29,065	58.4	81	30,804	71.7	162	29,934	64.6
19	Minnesota	81	2,250,606	27,785	70.3	79	26,943	63.6	160	27,369	66.9
20	San Diego	81	2,195,373	27,103	63.5	80	32,877	72.0	161	29,972	67.8
21	NY Mets	80	2,148,808	26,860	64.3	81	32,217	73.4	161	29,555	69.0
22	Arizona	81	2,073,730	25,601	54.0	79	31,481	70.6	160	28,504	61.9
23	Seattle	81	2,064,334	25,485	53.2	80	28,158	66.3	161	26,813	59.3
24	Oakland	80	2,003,628	25,045	71.4	81	28,757	65.6	161	26,912	68.2
25	Kansas City	81	1,956,482	24,154	63.7	81	26,872	62.8	162	25,513	63.2
26	Houston	81	1,751,829	21,627	52.8	81	27,191	63.0	162	24,409	58.0
27	Miami	81	1,732,283	21,386	57.1	81	28,892	65.4	162	25,139	61.6
28	Chicago White Sox	79	1,650,821	20,896	51.5	81	28,519	66.7	160	24,755	59.4
29	Cleveland	78	1,437,393	18,428	42.4	81	29,107	68.9	159	23,868	55.7
30	Tampa Bay	81	1,446,464	17,857	52.4	81	28,685	65.8	162	23,271	59.9

*In recent years most cases of doubleheaders are split/day-night doubleheaders which means they have two gates/separate attendance figures. In these cases above they are true doubleheaders with only one attendance number. (ESPN.com, 2014)

Stage 4- Marketing Strategy & Development

The New Product Development Process

Stage 4- Marketing Strategy & Development

The New-Product Development Process (NDP) is outlined above by Kotler & Keller (2012).

 Marketing strategy can be defined in terms of the product and the customer focus. On the dimension of product focus, “a company can concentrate on developing products that are essentially variations of existing products- product modifications, or it can focus on products that fall outside the established product line- product diversifications.” (Hart & Baker, 1996, p. 136). The second dimension of marketing strategy is customer focus. “If new products are primarily aimed at getting new customers, the strategy is offensive. If they are mainly directed toward trying existing customers closer to the company, the strategy is defensive.” (Nystrom, 1977).

Kotler & Keller (2012) break the marketing strategy components down into three parts;

1.      Identify the target market, size of the target market, its structure and behaviour; the products positioning strategy including its sales positioning and market share.

2.      Outline the product’s planned price, distribution and promotion strategy for the first year.

3.      Describe the long-run sales and marketing mix strategy of the product over time.

Examples of Marketing Strategy and Development

iGolf is a mobile golf GPS application. L1 technologies Inc. are the company behind iGolf. 

Marketing Manager- Anthony Zazo has developed a marketing plan for iGolf. 

This has broken the marketing strategy components down into three parts as outlined above by Kotler & Keller.

1.      iGolf’s target market is golfers in the USA who currently own GPS-enabled mobile devices. The current market size and potential for iGolf Mobile is approxiamately 6.643million people in USA. The size of this market is approximately $3.58m. Anthony Zazo outlined that L1 aimed to position themselves as a company that introduce affordable, high quality products and solutions.

2.      iGolf was promoted through newsletters, social media, public relations, merchandise shows and their own website. The planned price is higher that all 14 competitors because it is a premium product. iGolf has been distributed electronically via downloads to consumer’s mobile devices.

3.      “L1’s sales strategy will entail gaining acceptance and distribution for the application through the mobile ‘store’ of all major wireless companies in the United States.” (Zazo, 2003).

Quick Baseball

See table below for my new sport format- Quick Baseball. Quick Baseball is a shortened format of Baseball which will hopefully be played by all 30 teams in the MLB.

Target Market	Viewers of Major League Baseball (MLB)
Size of Target Market	Approx. 1.01billion people (Calcaterra, 2014) This is the number of viewers that watched the MLB in 2014.
Planned Price	Ticket price 40% cheaper that current prices for MLB. So to watch a MLB game at Boston it would cost $50. To watch a Quick Baseball game at Boston it would cost $20
Profit Goals	Aim to sell an average of 20,000 tickets a game (60 games will take place during the season) at average price of $15. Total profit at end of the season= $18,000,000

References

Calcaterra, C. (2014). Comment of the Day: How many people really watch MLB games?. (online) Hardballtalk.nbcsports.com. Available at: http://hardballtalk.nbcsports.com/2011/09/15/comment-of-the-day-how-many-people-really-watch-mlb-games/ (Accessed 3 Dec. 2014).

Hart, S. J. and Baker, M. J. (1996) New Product Development , Hart , S. (ed.). London: The Dryden Press.

Nyström, H. (1977) Market Strategy and Market Structure: Learning and Adaptation in Market Relations.

Zazo, A (2003). “iGolf Mobile Marketing Plan”. Available at: https://elp.northumbria.ac.uk/bbcswebdav/pid-3405259-dt-content-rid2754417_2/courses/2013YL_SP0568BNN01/iGolf.pdf. (Accessed 3 Dec. 2014)

Stage 3- Concept Development & Testing

The New Product Development Process

Stage 3- Concept Development & Testing

The New-Product Development Process (NDP) is outlined below by Kotler & Keller (2012). 

Concept Development & Testing is the stage that comes after the Idea Screening process. “Concept test is a test to evaluate new sports product idea, usually before any prototype has been created”. (Lamb, Hair & McDaniel, 2009). Concept testing takes place during the concept-development phase. “It is intended to glean something of customers’ opinions about the product idea before very much investment has been committed.” (Trott, 2004, p. 185).

Concept development is the process of “turning an idea into a recognizable product concept, with attributes and market position identified.” (Hart & Baker, 1996, p. 156). Hart and Baker go on to say; “this process is an explicit assessment of customer needs to appraise market potential and an explicit assessment of technical requirements.”

Examples of Concept development & testing

Concept development and testing is used by various sport organisations. An example of this is when the ICC tested the possibility of introducing day/night test matches. Cricket Australia chief executive James Sutherland said “The aim of this is to try to make Test cricket more accessible for fans.” (BBS Sport, 2014). 

The ICC decided to test this by introducing modified equipment such as a pink ball and the use of floodlights as soon as the umpires decide the light quality is too low. It was thought that the pink ball would be easier than the original red ball for the batsmen to see when the floodlights are on. However when asked about the pink kookaburra ball, ACA chief executive Paul Marsh said "the overwhelming majority of players believe the pink Kookaburra ball isn't yet ready for test cricket.” (www.auscricket.com.au) As a result of this the ICC are continuing to trial this concept.

FIFA also used concept testing to test the Adidas Brazuca match ball. The ball went through a rigorous testing procedure for two and a half years and came through with flying colours. “It was tested by over 600 professional players and 30 teams in ten countries across three continents, making the brazuca the most tested ball in adidas’ history.” (Quality.fifa.com, 2014) As a result the ball was awarded the highest FIFA quality mark, FIFA APPROVED.

Quick Baseball

To test Quick Baseball my new concept I will conduct qualitative research with customers.

This research will help me understand customer’s needs so that I can come up with ideas for products that meet those needs. I will consider the following questions;

• Is the sports product or service idea [format] easy to understand?
• Are there distinct benefits over those sports products & services [formats] currently on the market?
• Are the claims about this sports product/service [format] believable?
• Would you buy this sports product/service [format]?
• Would you replace your current brand with this sports products/service [format]?
• Who would use the sports product/service [format]?

 References

BBC Sport, (2014). First day-night Test planned for 2015. [online] Available at: http://www.bbc.co.uk/sport/0/cricket/28085871 [Accessed 26 Nov. 2014].

DailyTelegraph, (2014). Day-night Tests: Tasmania’s Ed Cowan backs concept but has doubts about pink ball. [online] Available at: http://www.dailytelegraph.com.au/sport/cricket/daynight-tests-tasmanias-ed-cowan-backs-concept-but-has-doubts-about-pink-ball/story-fni2fnmo-1227124026530?nk=4eb8bffa5758ab147a3ba4b4cf272fd0 [Accessed 26 Nov. 2014].

Hart, S. J. and Baker, M. J. (1996) New Product Development , Hart , S. (ed.). London: The Dryden Press.

Pride , W. M. and Ferrell, O. C. (2013) Foundations of Marketing. 5th edn. South-Western: Erin Joyner.

Quality.fifa.com, (2014). adidas brazuca – tried and tested - FIFA Quality Programme. [online] Available at: http://quality.fifa.com/en/Footballs/Football-facts/adidas-brazuca--tried-and-tested/ [Accessed 26 Nov. 2014].

Trott, P. (2004) Innovation Management and New Product Development (2nd Edition). United Kingdom: Financial Times/ Prentice Hall.

Uk.reuters.com, (2014). Cricket-Players unconvinced by pink ball for day-night tests. [online] Available at: http://uk.reuters.com/article/2014/07/01/cricket-australia-night-tests-idUKL4N0PC20W20140701 [Accessed 26 Nov. 2014].

Stage 2- Idea Screening

The New Product Development Process

Stage 2- Idea Screening

The New-Product Development Process (NDP) is outlined above by Kotler & Keller (2012).

Idea Screening is the stage that comes after the Idea Generation process. “Idea screening is a process, formal or informal, through which you evaluate a product or service idea to determine if it’s worth the time and money to develop further”. (Hooker & Monas 2008, p.189).

Lots of ideas are generated in the idea generation process so the idea screening process is required to filter those ideas and the ideas that pass through the filter are the ideas which are relevant and most likely to succeed. This process saves a lot of time by not going into the development of every single idea but only the relevant ideas.

“The initial screening of a new product idea is critically important. Risky projects (i.e., those with high probabilities of failure) need to be eliminated early before significant investments are made and opportunity costs incurred.” (Calantone, Benedetto & Schmidt 1999, p.65).

Examples of Idea Screening

Ideas can be screened by using various tools. Heinz have worked with In Sites Consulting to develop their own Idea Screening Tool (See Appendix A). This tool “incorporates contemporary marketing thinking in the KPI selection and utilizes Innovation Power and Purchase Power as tools to predict the potential of new ideas across categories, countries and projects. The Innovation Power as a composite score, integrating all KPIs, allows having a single score to evaluate an idea on” (Goderis 2014). 

By using this tool Heinz have been able to screen all ideas and they know which the good ideas are after using this tool as the score will indicate the likelihood of the idea being successful.

Sports organizations such as Nike and Adidas could use a Radar tool (See Appendix B) to screen their ideas. For example Nike or Adidas could use this tool to determine which sort of material would be more suitable to create a waterproof running trainer. They would list types of fabric along the outside of the graph and then score them out of 10 using cost, practicality, comfort, risk of breaking and weight as decision factors.

Decision Matrix

A decision matrix “helps to evaluate competing solutions against a weighted set of customer-oriented criteria, ensuring the most important factors carry additional weight in the final decision, reducing the probability of biasness during screening” (Velaction, 2012).

Benefits of using a Decision Matrix include;

·         Customer Focused; concepts are evaluated against customer-oriented criteria.

·         Reduced development time; using a structured approach develops a common vision and language for the design team.

·         Better group decision making; the decision is more likely to be based on objective criteria.

·         Documentation of the decision process; the method provides its own documentation.

Below is a decision matrix I created. I came up with some decision factors which I could rank and rate each idea against. (See Appendix C for Explanation of Decision Matrix Ratings). The idea with the highest score was Quick Baseball, I am going to develop this idea. 

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References

Calantone, R.J., Benedetto, A.D. & Schmidt, J.B. (1999) ‘Using the Analytic Hierarchy Process in New Product Screening’, Journal of Product Innovation Management, 16(1), pp. 65.

Goderis , T., 2014. Heinz Idea Screening. InSites Consulting. Available at: www.insites-consulting.com/cases/heinz-idea-screening/ (Accessed November 17, 2014).

Hooker, R. & Monas, S., (2008). Shoestring Venture: The Startup Bible, New York.

Launch Excel, (2014). Decision Matrix Download Page. (online) Available at: http://www.launchexcel.com/resources/decision-matrix/decision-matrix-download-page/ (Accessed 19 Nov. 2014).

Velaction (2012) Decision Matrix Template. (online) Available at: http://www.velaction.com/decision-matrix-template/ (Accessed on: 19 Nov.2014).

Appedix

Appendix A- Heinz Idea Screening Tool

Appendix B- Example of a Radar Diagram

Appendix C- Explanation of Decision Matrix Ratings

Using a decision matrix template on excel I came up with 7 different decision factors and ranked them 1-7. 1 being the most important decision factor and 7 being the least important. I then weighted the decision factors. The least important factor was weighted 1.0 and the most important factor was weighted 3.0. See below for rank and weight for each decision making factor.

Rank	Decision Factors	Weight
7	Risk of Injury- How high is the risk of injury?	1.0
6	Existing & Potential Competition- How much competition is there?	1.3
5	Size of Market- How big is the target market?	1.6
4	Cost- Upfront costs and ongoing costs.	1.9
3	Enjoyment- How much will the idea be enjoyed?	2.0
2	Practicality- How practical is the idea?	2.5
1	Profit Potential- How much profit is the idea likely to make?	3.0