New Product Development


Who should ultimately design the product? The customer, of course. - Kotler

Six categories of new products
1. 2. 3. 4. New-to-the-world products New product lines Additions to existing product lines Improvements and revisions of existing products 6. Repositioning 7. Cost reductions

Major Stages in New-Product Development

Idea Generation
Company Employees Customers Competitors Distributors Suppliers

Idea Screening
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Spot good ideas and drop poor ones. Develop system to estimate: market size, product price, development time and costs, manufacturing costs, and rate of return. Evaluate these findings against set of company criteria for new products. DROP Error and GO Error

Concept Development and Testing
• Product Idea: idea for a possible product that the company can see itself offering. Product Concept: detailed version of the idea stated in meaningful consumer terms. Product Image: the way consumers perceive an actual or potential product.

Marketing Strategy Development
The Target Market Planned Product Positioning Sales, Market Share, & Profit Goals

Part One Describes:

Part Two Outlines the First-Year’s:
Product’s Planned Price Distribution Marketing Budget

Part Three Describes Long-Run:
Sales & Profit Goals Marketing Mix Strategy

Business Analysis

Involves a review of the sales, costs, and profit projections to assess fit with company objectives. If yes, move to the product development phase.

Product Development

• • • •

Develop concept into physical product Calls for large jump in investment Prototypes are made Prototype must have correct physical features and convey psychological characteristics

Test Marketing
• Market Testing
– Consumer-Goods Market Testing
• Seeks to estimate four variables
– – – – Trial First repeat Adoption Purchase frequency

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Sales wave research Simulated Test Marketing

Test Marketing

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Controlled Test Marketing Test Markets
– – – – – How many test cities? Which cities? Length of test? What information? What action to take?

– Business-Goods Market Testing

Test Marketing

– When (Timing)
1. First entry 2. Parallel entry 3. Late entry

– Where (Geographic Strategy) – To Whom (Target-Market Prospects) – How (Introductory Market Strategy)
• Critical path scheduling (CPS)

Challenges in New-Product Development
• Why do new products fail?
– – – – – – – A high-level executive pushes a favorite idea through in spite of negative research findings. The idea is good, but the market size is overestimated. The product is not well designed. The product is incorrectly positioned in the market, not advertised effectively, or overpriced. The product fails to gain sufficient distribution coverage or support. Development costs are higher than expected. Competitors fight back harder than expected.

Thank You, Class