Product Development and Packaging Sony Spherical Speakers - Case Study Example

Product Development and Packaging Sony Spherical Speakers Product Development and Launch Report By Xxxxxxxxxxxxxx New Product Development Manager New product development is an integral part of the evolution of the company in the future. New products keep the companies momentum going. New products may be variants of an existing one like new packaging or a new flavour or a slight modification. Alternatively, it may be a very new concept set to revolutionize the market. The life cycle of the product development of the Sony spherical speaker went through the following phases. Marketing Research A new product development process starts with the search for ideas. Many of the best ideas come with asking the customer what they need. Being the primary users of the product, often they are aware of the product characteristics with respect to the consumption perspective. Some of the well-informed customers often figure out what improvements need to be made before other customers are aware. Some ideas are also arrived at by figuring what the products lack and rushing to bridge the gap. Sony is known for its innovative products. With Apple iPod being a tremendous success with a market share of 80% in the digital portable media player market and sold over 30 million iPod devices by 2005. A market research of about 20,000 iPod consumers was undertaken in order to receive a feedback. The sample was random and consisted of subjects surveyed in diverse geographical areas of the country. The target segment included current iPod users and future iPod purchasers as well as those who were planning to purchase a home theatre system or a high-level stereo system within the next year. The fact that emerged most often was that multiple numbers of speakers were utilized to project sound in the room, and this was slightly cumbersome and the positioning required some effort. The separate speakers like the Dolby Surround Sound 5.1 standard based speakers, required several wires to be installed and once the speakers were installed, their positions were fixed and hence the sound was confined to the one spot. Portability was an issue. The survey subjects welcomed the idea of a single integrated speaker doing the work of the multiple ones. Idea generation Brainstorming sessions were held to discuss the gap in the market for such a product. With the spark for an idea generated, the cross-functional team consisting of consisting of engineers, market researchers, financial analysts and advertising agencies met to discuss and develop the concept. The benefits of having a cross-functional team served to bring in expertise from all related departments. The diversity of the team members brought in different cultural viewpoints that added to decision making potential. It helped reduce inefficiencies because problems were addressed in the initial process itself, rather than addressing them afterwards, that might have proved costly at the end of the product development process. The idea generation sessions that were on going, specific and involved, resulted in several viable alternatives. These were carefully screened to see if they aligned closely to the goals and strategy of Sony they were compatible to the existing production and packaging lines could be marketed through the current distribution channels and promotional expenditure that would be required Concept Development and Testing Careful analysis of the concept design, product/packaging prototype, justification, feasibility, delivery model was undertaken. The need for an integrated speaker replacing several speakers capable of throwing sound to various areas in the room was an exciting product idea to pursue. The ability of a transportable speaker that would be versatile and more usable was a stimulating concept. The product would be Sony's new spherical speaker that can be placed in the middle of a room to project sound in all directions. This would be instead of the consumer having to buy many speakers to project the sound inwards. It would include the following features: Delivers lush, stereo sound using reflector technology Automatic tuning receiver for reception up to 150' from the transmitter Built-in 4 watt amplifier, Mega Bass sound system Neodymium magnet for clear vocal reproduction Up to 3 1/2 hours of operating time with built-in rechargeable Nickel Cadmium battery Receiver: 9" x 12" x 5", Transmitter: 5 1/3" x 4" x 5 1/3" Includes AC adapter, transmitter and speaker/receiver Works great for iPod users aesthetically designed, so it could be an ornament as well and add to the dcor designed with the similar style of colours and materials as the iPod range Packaging No matter how practical the customers or how great the product , there's no doubt visual appeal is a major selling point to retailers, who want a dynamic-looking product, and to customers, who want to look cool. In keeping with the up-market customer profile, we decided to give the product a sleek sophisticated clean look to draw the eyes of the consumer. The visual styling gave retailers, customers and even industry experts an extra incentive to pick up the product and give it an edge in the fiercely competitive category. The colours on the packaging aligned to colours of the iPod that they matched. The exquisite sheen of the package created an instant appeal. A three dimensional depiction of the speaker on the carton was made prominent by using reflector paints. The Unique Selling Proposition of the product was determined to be its portability. "Your Music Goes with You" was the tag line adopted to appeal to the customers. Commercials showing people enjoying excellent sound quality of chosen music in their backyard, or pool parties and in the lawn were decided as a promotional entity. Magazines, billboards and newspaper ads were targeted. Point of display at retail giants, huge electronic billboards at the high traffic areas and display speakers at malls were looked into. A budget of $2 million was allocated for the launch advertising blitz. Concept testing was now undertaken and involved the process of presenting the concept to appropriate target consumers and getting their reactions. A pilot survey, which identified the survey subjects, was launched. This segment of users included those who were capable of an iPod purchase and over and above it be wiling to spend some more for the integrated speaker. The profiling of the subjects needed to include purchasing power and willingness to spend for the product as well as some awareness of music and technology. The target segment was identified and they were required to fill in a questionnaire about whether they would purchase such a product, based on The benefits it offered The need for a product that it fulfilled Whether a current similar product met this need Whether the price option entailed value to the customer Whether the intention to purchase was high Whether they could visualize a frequency of use for this product The participants had the incentive of winning one unit free in a drawing among the participants if they participated. The results of the survey were very encouraging. An astounding 92% of the survey subjects were highly impressed by the Sony spherical speaker and 85% of them had a high intention of purchase. Around 75% of them said that they were attracted by the package to look at the product. However, the initial retail price of $299.00 drew a value appeal of 56% and therefore, to increase the value perception, the retail price needed to be brought down to initially penetrate the market. Marketing Strategy Development Marketing strategy consisted of three parts. The first part analysed the target market size, structure and behaviour, the planned product positioning; and the sales, market share and profit goals sought in the first few years. In the second stage the planned price, distribution strategy and marketing budget for the first year were established. In the third part, the long run sales, profit growth, and marketing mix over time were analysed. Considering the installed base sales statistic of Apple to be more than 37 million iPod by the end of the year 2005 and predicted sales of iPod to the tune of 23.5 million units in 2006, we decided that target market size sale of about 60 million users and growing that was a good base to start. An assumption that even 10% of them would invest in the new speakers, gave us a modest sales target of 6 million pieces to be sold by the end of the year 2006. Since the initial price was considered a little higher, the price of the speaker was fixed at $249.00 to add value for the money spent. A three-year target of 20 million pieces was fixed. Discussions were held with the purchase and manufacturing department managers to ensure that they would be able to produce required raw materials as well as manufacture enough units to achieve desired target volume levels. The sales force was involved in the marketing strategy to ensure that there were sufficient funds allocated for the advertising and promotional campaigns. Product development Since the product had passed the concept phase, the product development phase converts it into a physical entity. This step involved considerable jump in investment over the other phases. This included detailed product, process design, and quality standards, product and process documentation. A prototype of the concept was developed. An external design studio was used to make a design that was aesthetically and visually appealing to the targeted buyer segment. There was some trepidation, as this stage will determine whether this idea could be translated into a technically and commercially feasible product. If it cannot, the accumulated project cost will be lost except for valuable learning and the whole idea would have been scrapped. The Sony spherical speaker came out as a finished product able to deliver greatly on the requirements. The prototypes were put under rigorous functional and customer testing. The product performed well to the management's satisfaction in functional and psychological testing. It was now ready to be dressed, packaged, branded and market-tested. Market testing Now the speaker was ready to be tested. A pilot test drive was decided to be launched in London and Paris. These cities were chosen because the demographics had a large base of the target consumer profile, heavy users of the iPod and early adopters of the new products. A sales force went all out to sell the product and give it a good exposure ably supported by the advertising and promotional campaign. The retail stores carried the product out front and gave it a good point of display. Timing was crucial. The product was test launched just a few months before the Thanksgiving season that allowed the product visibility and sales to pick up before the actual season began. Market testing was greatly successful and the Sony speaker sold a million units within the first month. The product was greatly acclaimed and accepted and received a good adoption among the target segment. Commercialization Since the market testing was successful, the next stage was to conduct a detailed financial analysis prior to full scale launch. Once this was done, full-scale start up of the commercial production was in full swing. Then the market launch of the product was launched worldwide in all the markets. Due to the involvement of the cross functional teams from the idea generation phase, tight control was an integral part of the process. An improved product launch process resulted in faster time-to-market and time-to-profit. Activities were better planned, coordinated, and more tightly integrated. Requirements were understood and resulted in more marketing that is effective, a sales force better prepared to begin selling the new product and a service and support group better able to service and support the new product, leading to greater customer acceptance. The launch of the Sony spherical speaker was very organised and executed without any major pitfalls. Post sales audit review In the first month, Sony spherical speaker sold close to 0.5 million pieces. By the end of the third month, 2 million pieces were sold. Now with the product in the market for the last 6 months, Sony spherical speaker has sold nearly 4 million units, way surpassing its half-yearly predicted sales of 3 million pieces as targeted helped along by the Thanksgiving and Christmas retailing season. Although post-seasonal sales may dip a bit, we expect that the product will achieve its targeted volumes by the end of the first year. The product seems to have been successfully adopted by the public adding another successful product to the innovative Sony line. 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