New Product Development

(NPD)
The 4 Elements of The Marketing
Mix
Product Price Place Promotion
Marketing Mix

Defining Product
Anything that you can sell
Marketing applies to a broad
range of products
Physical product
Service
Events
People
Ideas
Places

Most products are combinations
of goods and service
Pure
service
Pure
good
Core ... Actual ... Augmented product
Successful firms . . .
Fully understand the core
benefit sought by customers and
start with that concept
Consider the enhanced product
including delivery, service and
complementary goods
The 8-Stage New Product
Development (NPD) Process
New Product Development
Key: Recognize when you are
in an NPD environment
New Product Development (NPD)
1. Idea Generation & 2. Idea Screening
Generation: Firms are always on
the look-out
Screening:
Fit with manufacturing and
distribution expertise
Feasibility
3. Concept Screening
Prototype or storyboard
Focus group: Would you be
interested in a service that . . .
Approximation of willingness to pay

4. Marketing Strategy Development
and 5. Business Analysis
Marketing strategy:
Developing credible marketing
plans with positioning, target
and Marketing Mix
Business analysis:
Is there a high chance of a
good payoff?
6. Product Development
E.g. battery life in iPod
7. Market Testing
Some firms (fashion goods) dont test
the market: Put it out there, see if
people buy it (the costs of this must be
small)
= Market test by roll out
Simulated test market (dummy store)
new product is mixed in with familiars
Test markets: Several cities let us
tweak the Marketing Mix but rivals
may attempt disruption
8. Possible roll-out strategies
during commercialization
By geography
By market size
By customer type
(business/consumer/government)
By channel of distribution (Rx/OTC)
By use (special occasion/every day)
By benefit sought
The model for new product adoption
applies during roll out
Awareness Interest Trial Repeat
If we are not an
instant hit, do the
research
Most New Products Fail?

Consumer packaged goods fail most
often
Brand extensions not sought by
consumer (new colors, flavors,
packaging)
Products that attempt to meet a
need that few consumer have (e.g.
combination products)
Two forces for NPD
Consumer
needs
Technological
advances
When the
two align,
you have a
winner!
Big firms take a diversified
Portfolio Approach
Risk
Potential Payoff
Improve performance of existing product
Add feature to existing product
New product to existing markets
New product to new markets
Three keys to NPD
1. Recognize when you are in an NPD
situation
2. Understand that therell be many
ideas, and a few winners.
3. Tolerate a portfolio of products
A few (only a few) high risk products
And some no-brainers (with low
payoff)