New Product Development Strategy for Nanda Home

Introduction and Company Overview

Nanda Home, in 2011, is starting to struggle. The company has essentially a single product — Clocky — that has been on the market for several years. In that time, the company introduced some variants on the alarm clock theme, but has yet to find success in any other line of business. The founder is unsure of what the next step should be, in part because she has not clearly identified the underlying issues affecting the company.

The current situation is that the flagship product, Clocky, is nearing the end of the normal product life cycle for this category — evidenced by falling prices used to spur demand and by the fact that the company is frequently selling to existing rather than new customers. The two newer products also appear to appeal most to the existing customer base. Nanda Home had introduced a line of bags, but that venture failed due to lack of distribution, even though the product was apparently popular with those who purchased it. No financial data was provided in the case.

This report provides insight into the issues at Nanda Home. There are many potential reasons why the company is beginning to struggle, including some not mentioned in the case. This analysis leads to conclusions about the best course of action for Nanda going forward.

Basic Analysis of Company and Product

Nanda Home is run by its founder, who is handling essentially the entire business herself. This means she must split her attention across multiple roles, and she acknowledges that there are some functions she is not performing as well as she could. As with many entrepreneurs, she is more comfortable tinkering and generating new ideas than managing the day-to-day operations of the business — in particular, sales. Nanda Home is, for all practical purposes, a one-product company. Sales breakdowns were not provided, but over the past five years, Clocky has been the primary revenue and profit driver. There is little in the case material to suggest that the Ticky or Tocky will replace Clocky, and neither has generated the same degree of media exposure for the company.

At this point, the company has very limited resources. While its balance sheet was not disclosed, Nanda Home has one person running everything, one hit product at the end of its life cycle, and no new hit products on the horizon. The founder is essentially searching for a new product to drive the company forward, but everything she currently has is still at the concept stage. While her first concept was a success, it is highly unusual for an inventor to achieve multiple consecutive hit products. It seems fairly evident that the better strategy, five years ago, would have been to hire a marketing specialist and perhaps a finance and operations person, so that the founder could focus on new product development and build a pipeline. This lack of foresight has placed Nanda in a difficult strategic position: she must choose to either squeeze additional value out of Clocky or risk being forced to abandon the business altogether.

The product life cycle is typically estimated at three to five years, which would place Clocky in its decline phase. The current indicators — discounts required to drive sales, and sales going predominantly to existing customers — support this conclusion. While the founder worries about whether Clocky is a "fad," she is overlooking the broader reality that Clocky always had a finite shelf life, and that shelf life is now nearly exhausted. She abandoned the bags venture at the launch phase, which is unfortunate but does mean the concept could potentially be revisited. The Ticky and Tocky are little more than extensions of the Clocky concept, but without the Clocky branding — a significant missed opportunity. Even if they carried the Clocky brand, those products are unlikely to attract the same level of publicity or generate the same upside as the original.

This leaves the company without a viable product in the pipeline: one product at the end of its life cycle, and three potential offerings that might buy some time. Nanda should have precise figures on cash flow and runway, but the case does not provide them. The critical question is: exactly how much time does the company have with its current product mix?

Given that one of the main options for Nanda is to try and revitalize Clocky, it is worth considering some of the product's attributes. The product meets an interesting market need — many people are sleep-deprived and have difficulty getting out of bed in the morning. Clocky is a "want" product for its consumers, with the 25–34 age demographic representing the largest potential market. A key question Nanda must answer is what the actual market penetration ceiling is. She suspects there is untapped demand, but it is quite possible that the window for capturing the full potential market has already passed.

Clocky offers a fairly unique product feature. While substitutes exist in the form of other alarm clocks, replicating its exact function would require an awkward workaround such as placing one's phone across the room. Clocky is therefore superior to any reasonable substitute in what it does. This has an important implication: as long as this benefit has value and remains difficult to imitate, Clocky retains its competitive advantage. With more effective marketing and distribution, Clocky might still be positioned in the maturity stage of its life cycle, which would buy the company more time to develop a successor product.

There are two key issues with attempting to extract more sales from Clocky. The first is that its features are imitable — counterfeits and knockoffs already exist. Nanda's odds of successfully pursuing litigation or issuing a cease-and-desist to offending manufacturers are minimal. The more practical response is to ensure counterfeiters cannot gain a foothold through better distribution — effectively clogging distribution channels so that knockoffs are difficult to obtain. Currently, mail order through Canada and informal back-channel sales are the primary routes for knockoffs, which are poor distribution channels. Clocky should be able to maintain its market position if Nanda acts decisively.

The second issue is one of awareness. Because Clocky is unique in its features and is priced higher than close substitutes such as standard alarm clocks, and because consumers already have alarms on their smartphones, customers must specifically seek out Clocky to find it. The crux of the current situation is that only people who already know Clocky exists are buying it, and that number is not growing. If Nanda can increase awareness of Clocky, sales will follow.

The other two products — Ticky and Tocky — have some potential, and there is a case both for keeping them and for cutting them. They offer an opportunity to extend the brand and potentially rejuvenate the product life cycle. However, the market may not intuitively recognize the connection between these products and the original Clocky without clearer branding. Clocky is the brand that carries equity, and that brand is not being used to help sell the other products. Furthermore, Ticky and Tocky essentially cannibalize Clocky sales. The most productive path for brand extensions would be to incorporate new technology into an updated Clocky, and any such extensions should carry the Clocky name explicitly.

Finally, there is the distribution challenge. When a product is selling well — particularly early in its life cycle — it can access major retail distribution channels. At the end of its life cycle, with minimal marketing support and sluggish sales, securing shelf space at traditional retailers becomes nearly impossible. The good news for Nanda is that the company can sell online, including as a third-party seller on Amazon. Selling via Amazon and its own website, with free shipping offered, would create an attractive proposition for consumers and provide reach through one of the world's largest retailers. The opportunity cost of carrying Clocky is lower for Amazon than for a brick-and-mortar retailer, making it a more realistic distribution partner — especially through its third-party vendor program.

Key Challenges Facing Nanda Home

There are several challenges facing Nanda. First, sales have been in decline for several years, creating a potential solvency crisis, eroding retail channel relationships, and exposing the absence of a viable product pipeline. The company has limited resources across the board, including a lack of established business relationships. While Nanda is concerned about counterfeiters, she should reframe them as "competition" unless she plans to pursue genuine legal action. The appropriate response to competition is to outcompete.

Nanda therefore needs to accomplish two things above all else. First, she needs to buy time to get a new, high-potential product into the pipeline. Only she knows how much time she has, but it is reasonable to assume it is limited. Second, she needs to extract maximum value from Clocky while that window remains open. The product still offers a unique consumer benefit, so some untapped potential likely remains.

Nanda Home lacks the resources for the founder to simultaneously market existing products, manage the company's finances, and develop new products. She needs help — most urgently on the marketing side, since that is where she is least comfortable. Ideally, she would bring on someone capable of generating public relations coverage for Nanda Home, since it was PR — not traditional advertising — that drove the initial success of Clocky.

Conclusion

Nanda Home is a classic case of a first-time entrepreneur who tried to do too much by herself, and now finds herself with a declining product and nothing new in the pipeline. This is a genuinely difficult situation. Nanda may ultimately need to pursue an exit strategy. But assuming she is not yet at that point, she has a few reasonable options available to her. She should hire marketing help so she can redirect her energy toward product development, and she should begin selling on Amazon rather than continuing to pursue brick-and-mortar retail relationships that are unlikely to materialize.

Beyond stabilizing the current business, new products need to be developed — and they should not be alarm clocks, since such products will largely cannibalize Clocky rather than open new revenue streams. If bags can work, that is the direction to pursue. Nanda has the potential to be a serial entrepreneur and should not confine herself to a single product category. Consumers liked the bags, and she abandoned that opportunity prematurely. Other ideas will take time to develop, and depending on how much runway the marketing investment creates, she may or may not have the luxury of time to bring a new concept to market. But moving away from alarm clocks, being more creative with distribution channels, and bringing in marketing expertise to free up time for product development — these steps represent the best path forward for Nanda Home.