New Product development

Topic 7
 Reasons New Product Fails
 New Product Development (NPD)
 NPD Process
 Managing New Product Development
 Product Life Cycle (PLC)
 PLC Characteristics & Marketing Objectives
 PLC Strategies

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 New Product Failure

Competition in our global marketplace makes it essential for firms to

continuously offer new products to attract consumers. However, successful
new-product introductions are becoming more and more difficult.

 Reasons new products fail:

- High costs of R&D
- Competition for retailer shelf space.
- Over estimation of market size
- Poor product positioning
- Poor marketing mix
- Bad timing
02
  New Product Development &
 New Product Development Process
pg 285
New product development refers to original products,
product improvements, product modifications and new brands
developed from the firm’s own research and development.

Idea Generation Business Analysis

new product Product

Idea Screening Development
development
process:
Concept Development Test Marketing

Strategy Commercialization
Development
03
 1 generation
idea

Idea generation is the systematic search for new-product ideas.

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Source of ideas for marketers are:

i. Internal
- R & D (pick the brains of employees ie. scientists,
engineers, any staff !)

ii. External
- distributors
- suppliers
- competitors
- customers

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Hall
05
 2 screening
idea

Idea screening.
- helps spot good ideas and drop poor ones asap
- ideas are expanded into more complete product concepts
- marketers and researchers examine the chances that the
product concept might achieve technical and commercial
success.
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 3 concept development and
testing

Concept development several descriptions of the product are generated to

find out how attractive each concept is to customers. From these concepts,
the best one is chosen.

Product idea is an idea for a possible product that the company can see
itself offering to the market.
Product concept is a detailed version of the idea stated in meaningful
consumer terms.
Product image is the way consumers perceive an actual or potential product.

07
 Concept testing

Concept testing refers to testing new-product concepts with

groups of target consumers
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 4 marketing strategy
development

Marketing strategy development is designing an initial marketing

strategy for introducing a product to the market.

The marketing strategy statement consists of three parts.

1. A description of the target market; the planned value proposition;
and the sales, market share, and profit goals for the first few
years.
2. Outline of the product’s planned price, distribution, and marketing
budget for the first year.
3. Description of the planned long-run sales, profit goals, and
marketing mix strategy.
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 5 business
analysis

Business analysis involves a review of the sales, costs, and

profit projections for a new product to find out whether they
satisfy the company’s objectives.
- New product can be profitable?
- Enough potential demand?
- Enough firm resources for successful development?
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 6 development
product

Product development R&D or engineering develops the

product concept into a physical product.

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 Example of Product development

At Gillette, 200 volunteers from various departments come to work

unshaven and enter small booths with a sink and mirror. There they take
instructions from technicians on the other side of a small window as to
which razor, shaving cream, or aftershave to use. The volunteers
evaluate razors for sharpness of blade, smoothness of glide, and ease of
handling. In a nearby shower room, women perform the same ritual on
their legs and underarms.
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Hall
12
 7 test
marketing

Test marketing is the stage at which the product and

marketing program are introduced into realistic market
settings.

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Pearson Education,
Inc. Publishing as
Prentice Hall

13
 Test marketing

Standardized Test Markets occur when the company finds a small number of
representative test cities, conducts a full marketing campaign in these cities, and uses
store audits, consumer and distributor surveys, and other measures to gauge product
performance. Drawbacks include costs, time and risk of competitor scooping up the
idea.

Controlled Test Markets track individual consumer behavior for new products from
television set to the checkout counter. These markets are composed of stores that have
agreed to carry new products for a fee. Such test markets provide in-depth purchasing
data not possible with retail point-of-sale data alone. Also, the system allows companies
to evaluate their specific marketing efforts.

Simulated Test Markets are basically simulated shopping environments. The company
shows ads and promotions for a variety of products, including the one being tested, to a
sample of consumers. It gives consumers a small amount of money and invites them to
a store where they may keep the money or use it to buy items.
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8 commercialization
final

Commercialization is introducing the new product into

the market.
Decisions must be made concerning:
- when to launch (timing)
- where to launch (location)
- how to launch (either partial market & nation-wide
market rollout)
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 Managing new product development requires:
pg 293

CUSTOMER-CENTERED FOCUS -

TEAM BASED APPROACH -

SYSTEMATIC APPROACH -

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Customer-centered new
product development focus
begins with a thorough understanding of
what consumers need & value ie. focus
on finding new ways to solve customer
problems and create more customer
satisfying experiences

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17
Team-based new product development
Company departments work closely together in cross-
functional teams, overlapping the steps in the product
development process to save time and increase
effectiveness.
ie. company assembles a team of people from various
departments (eg. marketing, finance, design, manufacturing,
legal & may even include supplier or customer’s company)
that stay with the new product from start to finish.

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Systematic Approach in new product
development used to collect, review, evaluate, and
manage new-product ideas.

ie. company encourages innovation among staff & may even

have a innovation manager in charge of encouraging all
stakeholders (employees, suppliers, distributors) to become
involved in finding & developing new products

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  Product life cycle

PLC is the way products go through 5 stages from development to death:

1. Product development begins when the company finds and develops a new-
product idea.
2. Introduction is a period of slow sales growth as the product is introduced in
the market. Profits are nonexistent in this stage because of the heavy expenses of
product introduction.
3. Growth is a period of rapid market acceptance and increasing profits.
4. Maturity is a period of slowdown in sales growth because the product has
achieved acceptance by most potential buyers. Profits level off or decline
because of increased marketing outlays to defend the product against competition.
5. Decline is the period when sales fall off and profits drop.
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 PLC strategies
PLC can be applied to:

STYLE

FASHION

FAD
.

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Style is a basic and Fashion is a Fad are temporary
distinctive mode of currently accepted periods of
expression or popular style in a unusually high
given field. sales driven by
consumer
enthusiasm and
immediate product
or brand
popularity
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  Summary of PLC Characteristics & Objectives
pg 303
Characteristics Introduction Growth Maturity Decline

Sales Low Rapidly rising Peak Declining

Cost per High Average Low Low
customer
Profits Negative Rising High Declining
Customers Innovators Early Middle Majority Laggards
Adopters
Competitors Few Growing Stable & begin to decline Declining

Introduction Growth Maturity Decline

Marketing create product Maximise Maximize profit while Reduce

Objectives awareness & market share defending market expenditure &
trial & brand share milk the
loyalty brand
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  Summary of PLC Strategies
pg 303
Strategies Introduction Growth Maturity Decline
Product Offer a basic Offer product Diversify brand Phase out
product extensions, service & models weak items
& warranty
Price Use cost-plus Use penetration Use price to Cut price
price price match/beat
competitors
Place Selective Intensive More intensive Use selective
distribution distribution distribution distribution by
phasing out
unprofitable
outlets
Promotion: Build product Build awareness & Stress brand Reduce to level
Advertising awareness interest in the mass differences & needed to
among early market benefits. Use retain hard core
adopters & reminder loyal customers
dealers advertising
Promotion: Use heavy sales Reduce to take Increase to Reduce to
Sales promotion to advantage of heavy encourage minimum level
Promotion entice trial consumer demand brand switching 24