New Product Development – A Historical & Industrial Perspective
Marks & Spencer plc, (also known as M&S, Marks and Sparks, Marks or Marks’s) is British retail chain store with many branches around the world; it’s the most recognized store in UK that is also the largest in clothing and food retailing categories. Both product categories are available at it most of the shops around the world. M&S also has another line dedicated to home furnishing including bed linen, and furnishing items. Third line is much younger and smaller than first two. In recent past M&S has started its food business too. Food business is growing well despite various issues in its original product lines.
British became the first store of UK history that makes over one billion before tax profit in 1998. Last few years where not good for M&S, but now in 2007 its growing and developing again. Emerging profitability is good sign for M&S. In volume of business its four times smaller than UK’s most successful retailer ‘Tesco’.
New product development used to be the main concern for all business around the globe. The types of business like Marks & Spencer (M&S), need a very special concern about the NPD. M&S has product development division completely busy around the year in making various alternative solutions to the customers’ needs. Need of modern and innovative products is always the main focus of modern business and that is the main reason of high pace prevailing innovation system in business too.
M&S is the retailer serving its customers since 1894 has some of its land marks during last three decades and has gone through various phases of organizational development since 1984, some of these are:
- 1884 Michael Marks, a Russian refugee, opens a market stall in Leeds
- 1894 Marks forms a partnership with Tom Spencer, a cashier from the wholesale company IJ Dewhirst.
- 1926 Marks & Spencer becomes a public limited company
- 1928 M&S trademarks its own-brand label, St Michael.
- 1930s The company opens its flagship store at Marble Arch in London and sets up a food department.
- 1975 M&S begins international expansion with stores in Paris and Brussels.
- 1988 M&S acquires Brooks Brothers, an American clothing company and Kings Super markets, a US food chain.
- 1997 Company pays £192m for 19 Littlewoods stores 14 of them fail to achieve profitability by 2001
- October 1998 M&S reports the first fall in profits since the beginning of the decade. City traders predict: “Things are starting to slide.” M&S stock hits a high of 664p per share.
- December 1998 Despite banking £1.2bn in profits, the company’s share price is down 32% for the year. Stocks trade at 412p on December 30.
- February 1999 Long-time chief executive Sir Richard Greenbury is succeeded by Peter Salsbury as stock price continues to tumble.
- February 2000 Luc Vandevelde takes over as chairman after M&S pay him a £2m golden hello.
- May 2000 Vandevelde announces a boardroom cull, forces out three executive directors. Shareholder dividend slashed for the first time in its 74 years as a public company.
- September 2000 Salsbury resigns under shareholder pressure. Vandevelde takes over as chief executive.
- January 2001 Christmas sales figures mark out M&S as the worst-performing high street chain for the 3rd consecutive year. Profits expected to reach only £473m. Stock trading at just over 200p.
Every firm, whether it is a retailing giant or a manufacturing one, needs to redevelop or re-design, its product, delivery or even marketing to lure in new customers as well as to retain old ones.
According to Jirlendsson,(2000) it is imperative that firms should continually seek to produce new products so that they can conquer new markets, and hence stay ahead of the competition.
Similarly, retailers too, need to come up with new products, either that are completely new products, that is, made from scratch or re-designed keeping in view the changing demographics of the market, so as to remain ahead of the competition and thus, to remain in black (making profits).
The larger supermarkets in UK, have seen an increase of about 40 percent in their product offerings. Many of these are basically brand extensions, that is, same products, but in different forms, but the same brand names. It has some 450 stores within UK and 192 stores in 33 countries in four continents.
Being a retailing giant, it hasn’t just conquered the market but expanding its store chains, but by offering its patrons more categories as well as more choices in its product range. It started with offering groceries, then a few years later it introduced clothing, followed by food and then other items, much later on. (BBC, 1998) This ‘expansion’ of products, helped it to grow and expand, incorporating the daily grocery needs of the public.
Importance of NPD in M&S
Despite experiencing various ups and downs in its business empire M&S once against is very much focused and struggling to get its lost share of market. In this scenario, there is need of new product development that could find M&S additional customers and could bring more results in short span of time. Some of the needs are highlighted below:
- Retain consumers. New product development is important for M&S because firstly it has to keep up with the changing needs of the consumers or they will shift to other stores which could really bring the business down.
- Replace failing products. New products have to be introduced so that they may be able to replace the existing failing products that are not doing good business and therefore new products serve as a tool to boost business bringing the market share up.
- Increase Market share. M&S witnessed a sudden slump and Per Una range of clothes was introduced which helped bring business some stability and increase market share. More new ranges of product will further facilitate the growth of company.
- Explore wider markets. Consistent introduction of new products will enable M&S to explore wider markets and consumers. In 2006 M&S opened a technology department in 13 flagship stores selling technology goods which brought in a new set of customers widening the customer horizon.
- Competitive edge. Also, they will help M&S survive in the market of ever changing trends and give a tough time to competitors.
- Fresh look. New innovative products will give a fresh look to the company and attract new customers. This year they launched as new web store which serves as convenience for customers enabling a wider range of products to choose from. This enables them to reach out to more customers.
Marks & Spencer faces continuous falls in sales for many reasons in European markets especially in UK its own home market. Applying some innovative measures can bring the glory back and M&S may have a better position in the time to come.
Benefits of Developing New Products
Existing Product Range:
- Menswear
- Blue Harbour (The UK’s largest menswear brand)
- Blue Harbour Vintage (currently being phased out in favour of the core Blue Harbour brand
- Autograph
- Colezione
- Ladieswear
- Autograph
- Plus Collection
- Petite Collection
- Maternity
- Per Una Brand
- Limited Collection
- Classic Collection
- Bridal
- Per Una (with three hearts logo, is a range of female clothing)
Per Una Launched on September 28, 2001 as a joint venture between Marks & Spencer and Next founder George Davies. The brand name means for one female in Italian. All Per Una items include the three hearts logo, inspired by a postcard seen by Davies while on holiday in Italy. Per Una has been a major success for the company [9], and in October 2004, Marks & Spencer bought the brand in a £125 million, two-year service contract with George Davies.(wikipedia)
Main Factors That Influence Product Success are:
- A complete understanding of customers, markets and cost
- Strongly integrated and coordinated efforts
- Effective use of technological advances
- Developing Strategic Business Units (SBUs)
- Dedicated Company Resources
- Strong Marketing efforts
- Sophisticated R&D function
- Complete MIS networking
- Early Entry in market
New product development will give a new life to the company specially now when time is hard and company thinks very seriously for some bold decisions to caputer its lost market share again.
New products will bring old customers back first, then an on going trend of publicity and promotion will influence the new ones too. Bringing new customers is not a issue for any business but retaining them is difficult. If company introduces a good range of new quality products, there are lot of chances that company will be on strong footing once again and will take its due share in the market thought pushing back Tesco from its market leadership seems impossible now.
Suggested Approach for Effective NPD
There is a strong need to develop a new and more effective approach of NPD. Reasons are many but for main idea we can review some of main issues which have a strong influence on previous NPD strategy of M&S:
- During first two quarters Clothing Sales went down despite various marketing efforts
- Home Furnishing department also suffered from this down trend
- Women’s wear losing against competition
- More than 9% decline in sales of clothing and footwear
- Food Sales show rising trend by 5.9% though it’s a new line
- Company’s Belgian CEO and Chairman are concerned about this situation
In present situation of toughness and hardship company should develop an approach that is simple and can give immediate results to the company. Product engineering or product development departments in close supervision of management and a liaison with market forces, customer and competitors activities should develop a product development approach for the company. Figure below shows the process function of proposed development function of business.
NPD process stages
Idea generation
The first step towards introduction of a new product is the generation of an idea for a product. For this, research has to be conducted and the company has to know what the consumers need and demand. M&S has always had a weak research that is one of the major reasons they had a business slump earlier. M&S had to sell of its financial services to HSBC as it could not retain it and was not profitable. They incorrectly researched the market only to realize later that it was a failed product. Their recent idea of an online store seems a good idea as it is in line with the changing shopping trends.
I think that M&S should invest more on the research department and be in closer contact with the target market and come up with products that are needed by them instead of introducing products that they think are needed by the consumers.
Idea screening
The financial services idea was very indeed and it is something that the target market uses, however, it went downhill. This is because they failed to realize that it would require a lot more investment and the profit percentage was lower. The idea should have been screened out instead of being invested upon. (Jirlendsson, 2000)
Concept development and testing
The introduction of Per Una served to work very well with the firm. The concept was very well thorough after a through research of the market. The company realized that there was a need for a change in market. The association of the brand Next and George Davis was a well-thought idea. The Italian name of the brand perfectly fitted the market need and gave the upscale image the brand needed. Their research revealed that they needed a line for older core customers and they were able to retain them with Per Una. (Jirlendsson, 2000) However, they need to do the same with other products as well.
Business analysis
In order to fight competition, M&S has to reanalyze its product processes and analyze whether a new product will work efficiently for the company or not. Prices have to be lowered and there has to be an increased focus on quality. This is because competition is offering lower prices and M&S has to do to do the same.
Beta testing and market testing
Also, the company has to be very careful now when introducing a new product as it has stabilized a little currently it can’t risk introducing a bad product again. For this they have to be very careful and test market the products in the target market before introducing it all over. (Jirlendsson, 2000)
Commercialization
This is where the company has always fallen short. For a long time, M&S only relied upon traditional methods of promotion. Competition used TV as a media for advertising since 1955 but M&S resorted to rely on its reputation as a medium to introduce new products to the customers. This turned out to be threatening in the long run as the products failed to build connect with the consumers especially the younger age slots that were more prone to watching TV. It was only in 1990’s that M&S started using TV for advertising. Today it is using celebrities in commercials to build image of their brands with brand ambassadors.
The company discontinued St. Michaels and introduced Your M&S and is now using it for advertisements, in -store merchandising and online presence. However, there are mixed opinions about this new brand and whether it works to build loyalty or not. This shows their lack of research and what the consumers really wanted. The marketing of the new product is very important and identifying the right market for the product is the crux of it. A good product introduced in the wrong market will obviously result in a failed product. The medium of marketing have to be advanced and in accordance with the target market. (August 2002)
Managing the Life Cycle
Managing the decline of a product, or extending its life with a “mid life kicker”, is often not considered. Unfortunately when this activity is not planned the need to develop new products is often triggered by falling sales. At this point there may not be enough time for new products to be developed. (Ph.Joseph-MM- pp 345)
There is always a need to develop and grow together. For this purpose business must take care of product lifes cycle’s stages after commercialization phase and should make immediate corrective measures to avoid the mistakes company has made during last three decades.
Identification of reasons of differences in Approach
M&S suffered from various management disasters during last three decades and these are responsible for the difference in applied and required approaches. Some of the main are:
- Dependence of company one person i.e., Ex-CEO
- Lack of Focus of Marketing Analysis
- Poor monitoring of corporate image
- Ignorance of sense of loss and losing marketing share
- Poor and delayed diversification in product line
- Lack of concern for growth and sustainability
- Ignoring competitors and leaving them alone
- Lack of Pro-Active marketing and management
Recommendations
I think the company needs to build a connection with the consumers and be closer to them studying them closely so that when they introduce a product in the market it is what the consumers need and not what the company feels the market needs. There is a major problem in the research department and the company needs to make it more efficient. M&S had been disassociated with the younger generation and did not know what they required.
What the company needs to do is evolve with time and be proactive researching the needs of the consumers. When a new product is introduced, the ambiance of the outlets has to match its newness as it greatly contributes to enhance the new product. New appearance, better trained staff, more efficient modes of payment like acceptance of credit cards which were introduced a lot later and technological advances have to accompany the introduction of the new product.
Also they should separate their food from clothing range and brand them separately. New product introduction should be concentrated in the clothes business and investment should be made in its image building. Further expansion of the food business should be curtailed as it is showing a downward trend. This will reflect badly on any new product on the portfolio of M&S. Your M&S doesn’t make sense to me as it is not what the customers want and cannot connect to it. The Autograph range has been doing well and appears as if a lot of market research has been done before its introduction. No wonder it fit in well in the niche. (August 2002)
M&S has to focus more on the market, studying them thoroughly. They have to be proactive and introduce innovative products to keep the consumers intrigued. For this they have to concentrate.
Conclusion
Marks & Spencer, once market leader in retail business is in trouble these days as far as its over growth and overall market share is concerned. Tesco’s leading share is a bad mark on the history and face of Marks & Spencer too. Tesco could not grow in that way if it was not left unmarked and un-checked. To overcome this situation Marks & Spenser needs to change its overall business strategy with a special focus on new product development and more focus on consumers’ needs, wants and trends.
Marks & Spencer’s reason of success was its focus on consumers and market trends and now the lack of focus has become the threat for growth. An immediate action plan turning from dormant marketing strategies to proactive marketing strategies is the need of time. If company becomes a proactive and consumer centred company once again, there is no reason they can not achieve desired market share. Marks & Spencer should also open some new fronts in product line development by realising that being first in any product line is always a long term benefit for the customers. Some new fronts in food, garments, entertainment, house hold items and personal care can bring the company a new success.
References
- Jirlendsson, (2000) The New Product Development Process. . Available: http://www.hi.is/~joner/eaps/cq_npd1.htm
- (1998) Marks & Spencer profits top expectations. BBC News . Available: http://news.bbc.co.uk/2/hi/business/96531.stm
- (August 2002)Marks & Spencer introduces its own organic logo. [Online]Available: http://findarticles.com/p/articles/mi_m0DQA/is_2002_August_29/ai_91138358
- (2007) History and Future [Online] Available: http://en.wikipedia.org/wiki/Marks_&_Spencer
- Philip Kotler, Marketing Management, 12e, Product Development
- Ph.Joseph, Managing Mindsets, 2nde, McGraw-Hill 2002.
- http://www.scottish-enterprise.com/sedotcom_home/services-to-business/ideas-and-innovation/how_to_develop_a_new_product.htm
- http://en.wikipedia.org/wiki/New_product_development
- http://www.cm-insight.com/MS.html
- http://www.guardian.co.uk/marks/story/0,,1804124,00.html
- http://www.paddingtonwaterside.co.uk/timeforpaddington/ti_news_detail.asp?newsID=63
- http://www.atkearney.com/main.taf?p=6,2,1,2
- http://www.igd.com/cir.asp?menuid=20&cirid=1829
- http://www.typepad.com/t/trackback/22557/1639570
