New Product Development and Pricing Policy: Body Shop - Case Study Example

Body Shop New Product Development and Pricing Policy Idea of New Product Development and Business Analysis Body Shop International produces natural beauty care products that are inspired by the nature. There are 2400 stores in 61 countries and over 700 beauty products. There is wide range of skin care, hair care and body care products catering to categorized mass market. (The Body Shop International) I have observed both internal and external factors and proving the information that will guide the company in solving the purpose. Cosmetics industry is presently at the edge of maturity despite of the fact that there is chance to extent into the speedy markets of Eastern Europe, Brazil and Asia where purchasing power is rising speedily. Our company possesses both funding capacity and evident brand image that can aid in establishment in these markets. In the present scenario consumers are looking for continuous innovation in the products, so it is now necessary to develop innovative products to breakthrough the naturals-saturated markets. Total Sales Estimation: With the development and implementation of new product the sales in UK improved from -7% in the first quarter to -3% in second quarter. This indicates that we are heading in right direction. (The Body Shop International) New Product Development: 1. Target market and positioning strategy for new product: The new strategy adopted by our company will be ‘masstige positioning’ having innovative and reliable products at reasonable prices for our customers. We will provide premium products at affordable prices to the customers. These innovative products will cater to mass market. (The Body Shop - Body and soul, 2006) 2. Product attributes: The Company will develop a complete innovative sun care range having sunscreen minerals supplemented with antioxidants and moisturizers and hair care range which has been developed in assistance of trichologist. (The Body Shop - Body and soul, 2006) 3. Competition: There is wide range of competition both in domestic as well as international market. There is emergence of substitute products and ingression of many fresh companies in the industry. 9The Body Shop International) 4. Competitive advantage: The Company entertains strong brand image and brand loyalty. Body Shop is well known to develop innovative beauty and cosmetic products and is leading in terms of market performance. (The Body Shop International) Body Shop is the most familiar and appreciated brand in domestic as well as international market. In addition to all the Research and Development of our organization adds to the competitive advantage. (The Body Shop International) 5. Product development schedule, marketing and legal issues: The above mentioned innovative products need to be developed within a short span of time so that we can get benefit of early innovators. As a Marketing Manager, I believe interactive marketing strategy will prove fruitful to develop long term relations with our customers. Spending more on marketing tools cost a lot so they should be chosen so that they add measurable value. Marketing should be used as an investment and can include the most popular tool i.e. internet. But we cannot restrict to just one marketing tool so we will also promote our products through retailer as they can make the customers aware of availability and technical information of the products which could increase the sales. We can add at home experience in which the customers can experiment the product at their home before purchasing. The company must consider the safety of customers and develop the products in line with the government policy which states that in normal condition of use cosmetics mustn’t result in damage to the consumer’s skin. The company need to include time factor i.e. deterioration of products and should provide quality product having longer shelf life than other products in the market. 6. Production requirements: Our R&D department needs to develop the prototype of the product. The technicians and experts are needed to develop the product in line with the product specifications and expectations. I suggest Task Unification in which new tasks will be assigned to the existing elements of the products. The existing products will be supplemented with new innovative ingredients. (Thomas, 1995) Concept Testing, Test Marketing and Commercialization: As we have confronted many issues regarding product testing, this time as a Marketing Manager I will propose alpha testing for the new products. A group of target audience will be selected from the employees of our company. The ingredients used will have long history of safe use on human beings. Human reactions will be envisaged by using tissue culture protein testing. As there is intense competition in the home market in UK, so the company should explore the new markets. (The Body Shop International) For test marketing it will be advantageous to enter the Hong Kong market where the reputation of cosmetic industry is outstanding. This new market entry will establish more intense competitive environment as compared to home market. Gradually the product will be commercialized in other fast growing markets of North and South Asia parts depending on the response from the market and market research. Each product could be even more customized according to the market of entrance, like Hong Kong the factors like their traditions of use of local herbs, weather conditions and general skin type of people there should be considered. Role of Innovation: It is a proven fact that innovations results in improved business performance. It is evident from the facts of previous year when new product launching (Christmas gift range and better consumer services) boosted our profits to 17%. To enhance the competitive position in the globalize markets, Body Shop needs innovative processes and business model to combat with unpredictable environment, cutthroat competitions and shifts in the political, social and economic conditions. (The Body Shop International) Pricing Decisions for New product: Pricing important tool of marketing depends on demographics, spending habit of customers and latest trends. Consumers are ready to pay for the worth of the product. If the price is set beyond this level the consumers will not buy the products and if the price is lower than this level organization will miss the probable profit. (The Body Shop International) Consumers append their perceived value to the products that can be observed by market researchers. At the stage of test marketing, I believe Perceived Value Pricing will be beneficial due to strong brand image of the company. The prices of the new products will be set on the basis of its perceived value in the mind of the customer. Perceived value is calculated as a weighted average of the product’s perceived attribute scores. Market surveys need be conducted to analyze customer’s perceptions about the value of product. This will help marketers efficiently set the prices for new products. In this way the prices will be regarded as affordable by the customers. During commercialization this price will be adjusted lower than the competitors through experience curve. Methods for establishing competitive pricing policies: Experience curve pricing: With the experience in producing the product, staff learns the technology and production process better and work more efficiently. Therefore more units are produced in same time and cost of production decreases. This justifies the low prices of the new products since a large number of price sensitive customers are present in the market. Although the company loses revenue initially by setting the prices low, it should be able to recover with reduced cost of production. E.g.: TI (Texas Instruments) gained cost advantage over Gillette through experience curve pricing. (Patsula, 2007) Product Bundling Pricing: As most of the customers look for complete solution, so the related products can be bundled together with main product. The bundled product is sold at discounted price. In this pricing strategy, marketers need to anticipate customer needs and accordingly bundle the products. This pricing method has the only drawback that it requires lot of research to be done and time consuming process. E.g. L’Oreal provides conditioner, applying comb and gloves along with hair dyes. Secondary Data for setting the pricing of new product: Competitor Analysis: Cosmetic products face huge competition across the departmental stores, tele shopping, Internet shopping and mass merchandizing. (Body Shop Competition, 2009) Biggest competitors of Body shop are Aveda, Boots, Bath & Body Works, Kiehl’s and Sephora. These competitors create a threat regarding the reputation of Body Shop. Body Shop lags behind from its competitors in terms of customer services and design of product. Boots, Lush, and others local brands are providing the same products for which Body Shop was well-known for. (Body Shop Competition, 2009) Aveda and Kiehl’s provides more attractive offer for the costumers. Therefore Body shop is required increase its customer base by providing more in store experience along with attractive pricing to the consumer to breakthrough the cutthroat competition. (Body Shop Competition, 2009) Data analysis provides information about the consumers and markets, and their reaction to various products, prices, distribution and promotional strategies. Marketers who can collect accurate and relevant information quickly and can develop their strategies quicker than their competitors will be the winners of tomorrow. Pricing Policy Recommendations: As the market for cosmetics is quite saturated and there is perfect competition in the industry it is necessary to set the prices in accordance with our competitors. As a marketing manager I suggest penetration pricing policy. I think it will be beneficial because we can introduce products at lower prices than our competitors. This policy will definitely increase our market share and customer base and in addition will discourage competition. Initially we will lose revenue but our main purpose is to breakthrough competition. Eventually with the experience curve our production cost will be reduced that will recover our loss. After gaining enhanced brand loyalty we can provide bundled products that will confine the customers to buy whole kit and we will be able to sale more units. Hopefully this newsletter will endow you all with vital information that will help the company to proceed with the new development. References Kotler, P. (2006), Marketing Management, Pearson Education, Inc., New Jersey, USA McGrath, M. E. (2001), Product Strategy: Accelerating your Business, McGraw Hill, New York Patsula, P.J. (2007), Successful Business Planning in 30 Days, Pearson Education, Inc., New Jersey, USA Thomas, R.J. (1995), New Product Success Stories, John Wiley & Sons, Inc., New York Jones, I. (2005). “Good Deeds for Business Success”, The Daily Post. 2005, May 6, pp. 22. Lyons, T. 2005. “Body Shop is Back — and fitter than Every Body Shop is back – and Fitter than Ever”. The Mail on Sunday. 16 October, 2005, pp.8 Body Shop Competition. (2009). Available: http://www.hoovers.com/body-shop/--ID__41856,FRIC__294--/free-co-competition.xhtml (Accessed: 2008, November 15). Body Shop Scrutinized-Report by Franklin Insight Inc. (September 1994). Available: http://www.trilliuminvest.com/pdf/ifbw_9-94.pdf (Accessed: 2008, November 15). The Body Shop - Body and soul. (2006, October 20), Available: http://www.cosmeticsbusiness.com/story.asp?storycode=476 (Accessed: 2008, November 15). The Body Shop International. Available: http://www.thebodyshopinternational.com/web/tbsgl/about.jsp (Accessed: 2008, November 15). Read More