New product development

Introduction In market the product is the most tangible and important single component of the marketing programme. The development of new product means to find out whether the new concept can b implemented in practical or not from technical and commercial point of view.

³ A new product is a product that opens up an entirely new market,replaces an existing product,or significantly broadens the market for an existing product´. ARCH PATON

Challenges in New-Product Development
A company can add new products through acquisition or develoment.

The acquisition route can take three forms:1) It can acquire patents from other companies.

2) It can buy a license or franchise from other company.

3) The company can buy other companies.

The development route can take two forms: The company can develop new products

in its own town laboratories. 
It can contract with independent researchers or

new product development firms to develop specific new products.

Six Categories of New Product
1) New -to-the ²world products:-

new products that create an entirely new market.

2) New product lines:- new products that

allow a company to enter an established market for the first time.
3) Additions to existing product lines:-

new products that supplement established product lines (package sizes, flavour etc).

4) Improvements and revisions of existing products:- new products that provide improved

performance or greater perceived value and replace existing products.
5) Repositionings:- existing products that are

targeted to new markets or market segments.
6)Cost reductions: new products that provide similar performance at lower cost.

High cost Ignoring market researc h

poor design

Reasons for failure of new products

Wrong price

Ineffective advertising

Competit -ors

Several factors which hinder new product development: Shortage of important ideas in certain

areas:- there may be few ways left to improve some basic products.  Fragmented markets:- companies have to aim their new products at smaller market segments,means lower sales and profits for each product.  Capital shortages:- some companies with good ideas can¶t raise the funds needed to research and launch them. 

Shorter product life cycles:- when a new

product is successful,rivals are quick to copy it.  Cost of development:- a company typically has to generate many ideas to find just one worthy of development,& faces high manufacturing, marketing cost.  Social &governmental constraints:- new products have to satisfy consumer safety and environmental concerns.


Idea generation
Screening of new ideas Product concept development&testin g Business Product designing&develop ment Product testing







Future YES commercialization NO plans


1) Idea generation
The new product development process starts with the search for ideas. New product ideas can come from interacting with others and using creativity generating techniques.

Interacting with others
Ideas for new products can come from many sources like.
custome rs scientist s competitio rs

employee s

Top managemen t

2) Idea screening
After receving a number of ideas good or bad from the first stage ,the next step is to screen& evaluate the ideas which is useful for the company. The process of screening is critical evaluation of product ideas. The purpose of screening is to drop the poor ideas which is in incompitable with the company objectives.

customer satisfaction


Profit Company¶ s objectives

Market share

Increase sales

In screening ideas,the company must avoid two types of errors:1. DROP ERROR:-when the company dismisses an

otherwise good ideas. 2. GO-ERROR:-When the company permits a poor idea to move into development& commercialization. FAILURE  ABSOLUTE PRODUCT FAILURE.  PARTIAL PRODUCT FAILURE.  RELATIVE PRODUCT FAILURE.

3) Concept Development &Testing Concept development:- In this concept to measure the need,targets,purchase frequencyof the consumers, the gap level between new product&existing productin market. Concept testing:-its presenting the product concept to appropriate target consumers and getting their reactions


4) Marketing Strategy
If the concept testing is successful,the next step is to develop a preliminary marketing strategy plan for the introduction of the new. The plan consists of three parts.
FIRST PART:- it describes the target market¶s size,structure and behavior ;product positioning ,expected sales &profits.

Second part:- In this part outlines the planned price, distribution strategy and marketing budget. Third part:- In the last part long run sales & profit goals& marketing mix strategy over time.

5)Business Analysis
In this step efforts are made to establish whether the new product will b suitable or not? In business analysis following three types of estimate are made:Business analysis

Estimating future sales

Estimating future cost

Estimating future profits

1) Estimating future sales:- For business

analysis, first we estimate future sales of the product. 2) Estimating future costs :- different elements of the costs are analysed, it helps measuring the profitability of a product. 3) Estimating future profits:- it is also considered whether these profits will provide desired rate of return on capital invested or not. If not,the idea is dropped.

6) Product Designing & Development
In this stage,the company to develop product proto type so as to ascertain whether the company has the necessary technology available or procure the technology to manufacture product which staisfy the consumes ,business needs. There are two types testing:1) Alpha testing:- test within the firm. 2) Beta testing:-test with customer.

7) Test Marketing
Test marketing provides important clues,weakness about the product. In this stage where the entire product and marketing programme is tried out for the first time in a small number of well chosen and sales environment.

Market testing 
Consumers goods sales wave research. Simulated test. Controlled tests. Test markets.

Business goods Alpha &beta testing. Display at trade shows. Distributors display room test.

8) Commercialisation
If the product is found to be suitable as a result of analysis &study of the result of test marketing ,it is ready to be launched in the market. In commercializing a new product,ceratin decisions are vry crucial. A) When timing of market entry  First entry  Parallel entry  Late entry.

B) Where geographic strategy  Single locality  A region  National market  International market A launching of a new product,there many activites are to b coordinated,management can use network-planning techniques.

Therefore,efforts must be made to develop a unique,superior product marketed at a reasonable price in an effective manner.

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