Topic 3

New Product Development

STEPS OF NEW PRODUCT DEVELOPMENT

Business
Product
Strategy
Concept Gap
Idea
IdeaGeneration
Screening
Testing
Product
Commercialization
Development
Introduction
Development
Analysis
Development
BUSINESS STRATEGY

Customer Perception

Customer Behavior Analysis

Sustainable Advantage

Recurring Revenue Model

Break Even Analysis
Break Even Analysis
GROWTH HACKING STRATEGY

Acquisition

Activation

Retention

Referral

Revenue
PRODUCT DEVELOPMENT (PLC)

 Low Sales  Increasing Sales  Constant Sales  Reducing Sales

 High Cost  Reducing Cost  Reducing Cost  Constant Cost
 No Profits  Some Profits  Increasing Profits  Reducing Profits

Setting price based on your largest competitor

Product Launch Strategies

1. Price Skimming Strategy 2. Market Penetration Strategy 3. Follow Strategy

Marketer sets a relatively high Setting price based

Differentiation Low Price
initial price, then lowers on your largest
the price over time. competitor
PRODUCT LAUNCH STRATEGIES

1. Price Skimming Strategy 2. Market Penetration Strategy 3. Follow Strategy

Marketer sets a relatively high

Differentiation Low Price Setting price based on
initial price, then lowers
your largest competitor
the price over time.
 PRICE SKIMMING V/S PENETRATION PRICING

Market Market
Skimming Skimming
Strategy Strategy

Market Market
Penetration Penetration
Strategy Strategy
STRATEGY ADAPTATION

Strategy Good Reason Bad Reason

 First mover advantage

1. Market Penetration  Economies of scale  Poor value proposition
Penetrate  Locking in customers  Targeting a big segment
 Make a brand statement

 Demonstrate your value

 Startup w/high margin&
2. Price Skimming Strategy  Need to cover high costs
reinvest in innovation
 Make a brand statement

 Reference prices

3. Following Strategy fluctuation  Playing Safe in the market

 A dominant input impacts  Too lazy to differentiate
your value
MARKET PENETRATION STRATEGY

Differentiation Low Price

Strategic Strategic
Position Action Action Plan

 Sustainable  Disrupt & Amaze  Value Analysis

Advantage  Be Remarkable  Just in Time

 Unique Value  Create Market Niche  Automation
 Brand  Communicate your  Reverse Costing
 Core Marketing Differentiated  Market Research

Message Advantages  Localization

 Positioning  Create Buzz  Total Quality Control
PRODUCT POSITIONING (MATRIX)
HIGH QUALITY

Super
Premium

Premium

LOW Value for HIGH

PRICE Money PRICE

Generic

LOW QUALITY
PRODUCT DEVELOPMENT (VA)

Value Proposition

1. Emotional Value 2. Financial Value

3. Performance Value 4. Relational Value

PRODUCT DEVELOPMENT

Aspirational

Luxury Item

Emotional Value
Religious Beliefs

Social Beliefs
PRODUCT DEVELOPMENT

Discount

Best Price

Financial Value
Low Cost

Policy & Schemes

PRODUCT DEVELOPMENT

Superior Functionality

Innovative Features

Performance Value
Quality

Fashionable

Leader
PRODUCT DEVELOPMENT

Customization

Speed

Relational Value
Rapid Response

Achieve Timeline

Extra Service / Feature

 TESTING OF NEW PRODUCT
User Acceptance Testing

Unit Integration System Alpha Beta

Testing Testing Testing Testing Testing

Alfa Testing Beta Testing

 Performed by internal employees  Performed by clients and end users

 Performed at developers site  Performed at client or end user’s location

 Reliability and Security testing's - not performed  Reliability and Security testing's are checked
 USER ACCEPTANCE TESTING

Alfa Testing Beta Testing

 Involves both the white & black box technique  Involves only black box technique

 It requires lab or testing environment

 It requires real time environment (for public use)

 It’s a long execution cycle

 It require only few weeks of execution
 Critical issues or fixes can be addressed
 Critical issues or fixes can be addressed in

immediately future version of the product

COMMERCIALIZATION
 PRODUCT LAUNCH
 Press release
 Sample deliver to channel
buyers and target media
 Distribution strategy  Sale guide
 Pricing  Sale training
 Promotion strategy  Promotion and sale kit
 Web design  Product in inventory
 Mobile app design

Product
3 months 2 months 1 months 2 weeks 1 week Launch
Development

 Product descriptions and  Presentation

portfolio  Grand opening
 Social Media set up
 Product fact sheet  Speaking engagement
 E-newsletter design
 Targeting & Positioning  Email announcement
 Direct mail design
 Usage test  PR and events
 Print design
 Competitor analysis  Radio commercial
 Radio advertising plan
 Web update
 Promotion video
 Social media update
 Manpower allocation pf
promotion events
PRODUCT GAP ANALYSIS
 4 Problem Areas
Customer Value
 Poor knowledge of customer needs
 Poor knowledge of competition
 Inadequate market testing
Organization and People
 Lack of entrepreneurial leaders
 Poor employee motivation
 Weak innovation teams
 12 Key Reasons
Technology and Process
 Invention, not customer, comes first
 Weak cross-functional involvement
 Innovation is not institutionalized
Marketing and Selling
 Build it-and they-will-come attitude
 Product differentiation is weak
 Weak product launch program
PRODUCT INNOVATION (TYPES)

High
New to the World

New to the Company &

Local Market
Level of
Technology Line Extension /
Newness Flanker ards
w
& Re
k
Revision or Ris
Improvement

Cost Reduction &

Low Repositioning

Low Level of Newness to the Market High

PRODUCT-MARKET ANSOFF MATRIX
EXISTING PRODUCT NEW PRODUCT
EXISTING MARKET

MARKET PENETRATION PRODUCT DEVELOPMENT

NEW MARKET

MARKET DEVELOPMENT DIVERSIFICATION

PRODUCT-MARKET ANSOFF MATRIX

Price decrease

Increase in promotion and

distribution support

Market Penetration
Acquisition of a rival in the
same market

Modest product refinement

PRODUCT-MARKET ANSOFF MATRIX

Different customer segments

Commercialization of a good
that was previously sold only to
the households
Market Development
New areas or regions about of
the country

Foreign markets. 
PRODUCT-MARKET ANSOFF MATRIX

 Investment in R&D of
additional products;

Acquisition of rights to produce

someone else's product

Product Development
Buying in the product and
"branding" it

Joint development with

ownership of another
company who need access to
the firm's distribution channels
or brands.
PRODUCT-MARKET ANSOFF MATRIX

Related diversification

Diversification

Unrelated diversification
PRODUCT PORTFOLIO MANAGEMENT- BCG MATRIX

HIGH
Select Remainder
a few Divested
(Cash flow Product Uses)
MARKET GROWTH

Liquidate

LOW

HIGH RELATIVE MARKET SHARE LOW

(Cash flow Product Generates)
 GE / MCKINSEY MATRIX
Business Unit Strength
HIGH MEDIUM WEAK
HIGH

INVEST INVEST PROTECT

Market Attractiveness
MEDIUM

INVEST PROTECT HARVEST

LOW

PROTECT HARVEST DIVEST

 SWOT ANALYSIS
Strengths Weaknesses

 Your Specialist marketing expertise  Lack of marketing expertise

Internal

 A new, innovative product or service  Undifferentiated products or services (i.e. in relation to your
 Location of your business competitors)
 Quality processes and procedures  Location of your business
 Any other aspect of your business that adds value to  Poor quality goods or services
your product or service  Damaged reputation

Opportunities Threats
External

 A developing market such as the Internet  A new competitor in your home market
 Mergers, JV’s or Strategic Alliances  Price wars with competitors
 Moving into the new market segments that offer  A competitors has new, innovative product or service

improved profits  Competitors have superior access to channels of

 A new international market distribution
 A market vacated by an ineffective competitor  Taxation is introduced on your product or service
PORTER'S FIVE FORCES ANALYSIS
 Time and cost of entry
 Specialist knowledge
 Economies of scale
 Cost Advantages
 Technology Protection
 Barriers to entry
 Number of Competitors
 Quality Differences
Threat of  Other Difference
New Entry  Cost of Changing
 Customer Loyalty

Bargaining Power of Bargaining Power of

Supplier Buyer
Competitive Rivalry

 Number of Suppliers
 Size of Suppliers
 Uniqueness of Service
 Your Ability to Substitute  Number of Customers
 Cost of Changing  Size of each Order
 Difference between Competitors
Threat of  Price Sensitivity
 Ability to Substitute
 Substitute Performance
Substitution  Cost of Changing
 Cost of Change