NEW PRODUCT

DEVELOPMENT
WHAT IS A NEW PRODUCT?
The term new product can mean different things. Six different categories of
new products can be identified that are all quite different from each other. Still,
they are all called new products. 
New-to-the-world Products (really new inventions)
New-to-the-firm Products (new Product Lines)
Additions to existing Product Lines
 Improvements and Revisions to existing Products
Repositioning
Cost Reductions
 NEW-TO-THE-WORLD PRODUCTS
 These are those products which can be termed as new inventions,
really new products. As for example when the first Television was
made, or the first mobile phone/ smart phone.

NEW-TO-THE-FIRM PRODUCTS (NEW PRODUCT LINES)

 Products that take a firm into a category new to it. The products
are not new to the world, but are new to the firm. The new product
line raises the issue of the imitation product: a “me-too”.Eg Nestle
starts Maggie Noodles.
ADDITIONS TO EXISTING PRODUCT LINES
 These are simple line extensions, designed to flesh out the product
line as offered to the firm’s current markets. Examples: P&G’s
Tide Liquid detergent, Maggie comes with a Masala range etc.

IMPROVEMENTS AND REVISIONS TO EXISTING PRODUCTS

 Current products made better. Examples: HUL’s Surf laundry
detergent have been revised numerous times throughout their
history,  and there are countless other examples.
REPOSITIONING
 Repositionings are products that are retargeted for a new use or application.
Examples: Arm & Hammer baking soda repositioned as a drain or refrigerator
deodorant; aspirin repositioned as a safeguard against heart attacks. Also includes
products retargeted to new users or new target markets. Marlboro cigarettes were
repositioned from a woman’s cigarette to a man’s cigarette years ago.

COST REDUCTIONS
 Cost reductions refer to new products that simply replace existing products
in the line, providing the customer similar performance but at a lower cost.
May be more of a “new product” in terms of design or production than
marketing.
NEW PRODUCT DEVELOPMENT (NPD)

Definition : New-product development (NPD) is the overall process for

developing a new product, although the exact stages in this process may vary
by company.

According to Kotler and Keller, the major steps include the following 8 steps: 
Idea generation
Idea screening
Concept development and testing
Marketing strategy development
Business analysis
Product development
Test Marketing
Product commercialization
NEW PRODUCT DEVELOPMENT
PROCESS
1. IDEA GENERATION :
 The first stage of the New Product Development is the idea generation.
Ideas come from everywhere, can be of any form, and can be numerous.
This stage involves creating a large pool of ideas from various sources,
which include –
Internal idea sources: the company finds new ideas internally. That
means R&D, and employees.
External idea sources: the company finds new ideas externally. This
refers to all kinds of external sources, e.g.
distributors
 suppliers,
competitors.
customers,
2. IDEA SCREENING :
 Ideas can be many, but good ideas are few. This second step of new
product development involves finding those good and feasible ideas
and discarding those which aren’t.

 Many factors play a part here, these include –

 Company’s strength,
 Company’s weakness,
 Customer needs,
 Ongoing trends,
 Expected ROI,
 Affordability, x
 Feasibility etc.
3. CONCEPT DEVELOPMENT & TESTING:

 The third step of the new product development includes concept

development and testing.
 A product concept is a detailed strategy or blueprint version of
the new-product idea stated in meaningful consumer terms. 
 All the ideas that pass the screening stage are turned into concepts
for testing purpose. You wouldn’t want to launch a product without
its concept being tested.
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4. MARKETING STRATEGY DEVELOPMENT
 When a promising concept has been developed and tested, it is time to
design an initial marketing strategy for the new product based on the
product concept for introducing this new product to the market.

 The marketing strategy statement consists of three parts and should be

formulated carefully:
A description of the target market, the planned value
proposition, and the sales, market share and profit goals for the first
few years
An outline of the product’s planned price, distribution and
marketing budget for the first year
The planned long-term sales, profit goals and
The marketing mix strategy.
5. BUSINESS ANALYSIS
 Once decided upon a product concept and marketing strategy,
management can evaluate the business attractiveness of the proposed
new product by reviewing the sales, costs and profit projections for the
new product to find out whether these factors satisfy the company’s
objectives. If they do, the product can be moved on to the product
development stage.
 In order to estimate sales, the company could look at the sales history of
similar products and conduct market surveys. Then, it should be able to
estimate minimum and maximum sales to assess the range of risk. When
the sales forecast is prepared, the firm can estimate the expected costs and
profits for a product, including marketing, R&D, operations etc. All the
sales and costs figures together can eventually be used to analyse the new
product’s financial attractiveness.
6. PRODUCT DEVELOPMENT 

 Once all the strategies are approved, the product

concept is transformed into an actual tangible
product.
 This development stage of new product
development results in building up of a prototype
or a limited production model.
 All the branding and other strategies decided
previously are tested and applied in this stage.
7. TEST MARKETING
 The last stage before commercialisation in the new product development
process is test marketing. In this stage of the new product development
process, the product and its proposed marketing programme are tested in
realistic market settings. 
The prototype is introduced for research and feedback in the
test marketing phase.
Customers feedback are taken and further changes, if
required, are made to the product.
This process is of utmost importance as it validates the
whole concept and makes the company ready for the launch.
8. COMMERCIALIZATION
 Commercialization means nothing else than introducing a new product into the
market.
 At this point, the highest costs are incurred: the company may need to build or
rent a manufacturing facility.
 Large amounts may be spent on advertising, sales promotion and other marketing
efforts in the first year.
 Some factors should be considered before the product is commercialized:
Introduction timing. For instance, if the economy is down, it might be
wise to wait until the following year to launch the product. However, if
competitors are ready to introduce their own products, the company
should push to introduce the new product sooner.
Introduction place. Where to launch the new product? Should it be
launched in a single location, a region, the national market, or the
international market? Normally, companies don’t have the confidence,
capital and capacity to launch new products into full national or
international distribution from the start. Instead, they usually develop a
planned market rollout over time.
 CONCLUSIVE REMARKS

 In all of these steps of the new product

development process, the most important focus is
on creating superior customer value. Only then,
the product can become a success in the market.
Only very few products actually get the chance to
become a success. The risks and costs are simply
too high to allow every product to pass every
stage of the new product development process.