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New Product Development

New Product Development

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Published by: PRATICK RANJAN GAYEN on Oct 31, 2009
Copyright:Attribution Non-commercial

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09/25/2010

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NEW PRODUCT DEVELOPMENT
Stage Model:
1.IDEA GENERATION-Internally i.e. brainstorming-Externally2.SCREENING-Which ideas match the organisations ability to manufacture (match themto core competencies)-Check list encourages evaluators to be systematic-May involve marketers testing product concepts3.BUSINESS ANALYSIS-Product is evaluated to determine its potential contribution to the firm'ssales, costs and profits4.PRODUCT DEVELOPMENT-Is it technically feasible to produce the product and if it can be producedat costs low enough to make the final price reasonable5.TEST MARKETING-Limited introduction of the product in areas chosen to represent theintended market6.COMMERCIALISATION-Planning of full scale manufacturing and marketing of the new product 
NPD performs the following roles:
o
Ensuring that product obsolescence is avoided
o
Helping to ensure that the organisation can compete in new and growing marketsegments
o
Reducing the dependence upon one or more (declining) market sectors
 
o
Matching or beating competitors
o
Helping to achieve long-term growth 
Problems with test marketing
o
The dangers of the test market alerting competitors
o
The problem of finding representative test areas
o
The time needed to identify repurchase rates
o
Distributors being reluctant to become involved in test marketing costs
o
The difficulties of interpreting what is often an ambiguous results pattern80% of new product fail. What do you consider are the reasons for NPD failure?
Lack of product differentiation from existing products in the targeted market. (poor product positioning)
Poor screening of ideas generated
Poor test marketing (or inefficient/inappropriate test marketing)
Communication/promotion of the NPD is not carried out fully or is poor in display
Competing against an existing strong brand
Proactive role of competitors already established in the market-place, to NPD
Market sector not 'large' enough to take another product i.e. market already in saturation.Or the managers have overestimated the size of the market
The product under-performing
Competitors being too firmly entrenched
Lack of real commitment to the product from distributors
The product idea having been pushed through the NPD process by a senior manager,even through evidence exists to suggest that the product is likely to fail 
INNOVATION
The framework for studying the consumer acceptance of new products is known as"DIFFUSION OF INNOVATIONS" 
The Diffusion Process
"The process by which the acceptance of an innovation is spread by communication to membersof the social system over a period of time" 
Four Key Elements:
1.The innovation2.The communication process and channels3.The adoption time4.The social systems involved
 
 
THE SOCIAL SYSTEM
Refers to the target market or market segment. Modern social systems are characterisedby:
o
Positive attitude to change
o
Advanced technology
o
Respect for education and science
o
Rational, ordered social relationships
o
Interaction between members and outsiders
o
Willingness to change roles The social system's orientation sets the climate in which marketers operate to gain acceptancefor new products 
TIME: Affects three aspects of the diffusion process:
 1.PURCHASE TIME-The time that elapses between initial awareness of a new product and thedecision to purchase or reject it2.THE IDENTIFICATION OF ADOPTER CATEGORIES-Categories for grouping consumers according to when they adopt a new productInnovators: venturesome, eager to try new ideas, daring, risk-takersEarly Adopters: respectable, opinion leadersEarly Majority: deliberate not leaders, weigh up pro's and con'sLate Majority: sceptical, adopt after average time, react to peer pressureLaggards: traditional, local in outlook, past-orientated, suspicious of new(diffusion of innovation curve)3.THE RATE OF ADOPTION-The extent to which a new product has been adopted by members of asocial system-The rate of general adoption is getting shorter 

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