New Product

Development
Identifying Need
Creating Value
 Role and Significance of New Product Development.

• Achieve Growth

• Satisfy Customers

• Combat Competition

2
 Categories of New-Product

1. New to the world products- that creates entirely new markets

2. New product lines- New for company

3. Additions to existing product lines- Variety/ Flavor,

4. Improvements and revisions of existing products

5. Repositioning- targeted to new markets or market segments

6. Cost reduction- Input rationalization ( different value

propositions
 Categories of New-Product
• Hardly 10-15% are new to world products. Radical innovation It
involves high cost and risk. It might hurt the companies bottom line
but in the long run it would be of competitive advantage.
– Example of new to world product.. Mobile Telephony

• Radical innovation is hindered by

1. High market uncertainty

2. High investment costs
3. Highly competitive volatility
4. Short product life cycle
5. Difficulty in finding funding sources
 New Product Development Process

Marketing
Strategy Business
Development Analysis

Concept Product
Development Development
and Testing

Idea Market
Screening Testing

Idea
Generation Commercialization
1.Ways to Find New-Product Ideas
• Creative exercise • Keyword search to scan
• Time off for technical trade publications
people to putter • Competitor Mapping
• Observe Usage • Have employees visit
• Coopt Customer supplier labs
• Survey customers • Set up an idea vault
• “ Fly on the wall” • Company R&D
research
 2. Ideas screening
• What is the big value addition/ difference in the idea
• What/whose problem does it solve
• Target market size
• Projected Volume
• Competition,
• Price, VC, Contribution
• Cost and Time frame to develop, test and launch
 3. Concept development and testing

• Concept testing: involves presenting the product concept to target

consumer and getting their reactions

• Concepts can be presented symbolically or physically

• The more the tested concepts resemble the final product or experience,
the more dependable concept testing is.

• Previously presenting prototype was time consuming and costly. Today’s

firms use rapid prototyping to design the product on computer and then
produce plastic models of each; virtual reality to simulate reality;
 4. Marketing Strategy
• Following a successful concept test, the new product manager will develop a
preliminary strategy plan for introducing the new product into the market

Target M size, structure and behavior;

planned product positioning;
sales, MS and profit goals sought in
the first few years
Preliminary strategy plan
Has 3 parts Planned price, distribution strategy
and marketing budget for the first
year

Long-run sales and profit goals and

marketing mix strategy over time
 5. Business analysis
To determine whether they satisfy company objectives
– sales,
– cost and
– profit projections are prepared.

• Pay back period

• Risk
• Scenario/ Sensitivity analysis

• Impact on product portfolio

 6. Product Development

• Till now the product was only in drawing or as

prototype; next step involves a jump in investment that
dwarfs the costs incurred in the earlier stages

Alpha testing- Controlled Lab test. Testing the product within the
firm to see how it performs in different applications
Customer tests

beta testing - testing with the customers

The rank order

The paired-comparison
The monadic rating
 7. Market Testing

• Market testing:
– In testing consumer products, the company
seeks to estimate four variable
1. Trial
2. First repeat
3. Adoption
4. Purchase frequency/ replacement cycle

– The company hopes to find al these variable at

high levels.
 Market Testing

 Panel/ Blind test

 Sales-Waves Research:
 Simulated Test Marketing
 Pilot test market
 8. Commercialization

• At this stage
– Decision on Manufacture or build or rend a full-scale manufacturing facility are made

– Another major cost is marketing

new product campaign 1.When (timing)

rely on sequenced mix 2.Where ()
of market 3.To Whom (early adopters, heavy users
and opinion leaders ):
communication
4. How (introductory Market strategy):
 Criticality of time

 Two deadly sins in new product development are standardized

and sequential.

 These 2 “S’s” inevitably lead to a third—slow.

 The imperative is to develop mechanisms for the inter-

functional coordination of efforts to provide timely, relevant
data.
 Why do most new products fail

 In a forced test environment customer is generous in his feedback

 In fact customer inertia is very high– limits trial
 Customer is not able to assess BIG claimed difference when in use
 Customer preference for familiar is very high– limits repurchase
 Drag on account of media reach
 Distribution/product reach limitation is a big filter and drag
 Product team's excitement is simply not shared by customer
 Company torn between spending more good money after bad
money and limiting cash burn
 Very high fixed/committed costs in promoting a product and hence
if critical minimum volume ( BE) is not achieved, the product
support will be withdrawn leading o accelerated decline
 Characteristic of the innovation
• Five characteristic of an innovation that influence the rate of
adoption
1. Relative advantage- the degree to which the innovation appears superior
to existing product

2. Compatibility- the degree to which the innovation matches the values and
experiences of the individuals

3. Complexity: the degree to which the innovation is relatively difficult to

understand or use

4. Divisibility: the degree to which the innovation can be tried on a limited

basis

5. Observability- the degree to which the beneficial results of use are

observable or describable to others
 Characteristic of the innovation
• Relative advantage: typewriter vs personal computer. Was there a
relative advantage?
• Compatibility: Can I use this new cartridge in my existing razor
• Complexity: how easy it is to adopt? What do I need to
learn/practice before using it ( Using a steam mop with various
contraptions to clean surfaces)
• Divisibility: example ( Can I buy a 50g pack and experience or do I
need to buy this curved TV at Rs.75000)
• Observability: Did I lose my weight with this diet food

• Other characteristic that affects are cost, risk, scientific credibility,

social approval etc.,
Have Fun
learning
 Market Research
Taxonomy of Major Research Options

D e p th Interviews
Focus Groups
QUALITATIVE
Expert Ju d g e m e n t

Beta Tests

Standard Surveys Product Use Test

Concept Tests Pre-Test Market
Perceptual Maps Test Market
QUANTITATIVE
Conjoint Analysis Electronic Test Mkt.

PRE-PROTOTYPE STAGE POST-PROTOTYPE STAGE