Unit- 4

New Product Development

 New product development (NPD) is a process of taking a product or service from
conception to market.

 new product will be considered anything which is perceived as such by the

consumer or with which the firm has no previous experience.

 It means that a consumer views a product as new if any new thing is experienced or
any additional variants are provided with the existing product.

 Product development is the process of finding out the possibility of producing a

product. It includes the decision as to whether it would be feasible or not to produce
the product and whether it would be profitable or not for the enterprise to do so.
Allen and Hamilton have identified six categories of new product in
the terms of their newness to the company:

 New to the world – New products that create an entirely new product.

 New product lines – New Product that allows a company to enter an established market for the first
time.

 Additions to the existing product lines – New products that supplement a company’s established
product line.

 Improvements in revision to existing product – New products that provide improved performance.

 Repositioning – Existing products that are targeted to new markets.

 Costs reductions – New product that provides similar performance at lower costs.
Steps in New Product Development
New Product Development Process
Business
Analysis
Product
Concept Development
Development
and Testing

Test
Marketing
Idea
Screening
Commercialization
Idea
Generation
New idea Generation

Strategy for obtaining New Product Idea

Acquired New
Companies Product

Acquired Product
Patents Modifications

Acquired Product
Licenses Improvements
 Idea Screening
 Process to spot good ideas and drop poor ones as soon as possible.

 Many companies have systems for rating and screening ideas which
estimate:
 Market Size

 Product Price

 Development Time & Costs

 Manufacturing Costs

 Rate of Return

 Then, the idea is evaluated against a set of general company criteria.

Concept Development and Testing

1. Develop Product Ideas into

Alternative
Product Concepts

2. Concept Testing - Test the

Product Concepts with Groups
of Target Customers

3. Choose the Best One

Marketing Strategy
Target Market size, structure and
behavior. Sales & Profit Goals,
Market Share

Product’s Planned Price

Distribution Strategy and
Marketing Budget

Long term Sales & Profit estimation,

Marketing Mix Strategy
New Product Development Process
Step 5. Business Analysis
Step 6. Product Development

Business Analysis

Review of competitor Product Sales, Costs,

and Profits Projections to See if
They Meet Company Objectives

If No, Eliminate
Product Concept

If Yes, Move to
Product Development
 Test Marketing

Standard
Controlled
Test Market
Test Market
Full marketing campaign A few stores that have
in a small number of agreed to carry new
representative cities. Products.

Simulated
Test Market
“The presentation of Test in a simulated
advertising and promotional shopping environment
material for Test Product to to a sample of
member of product target consumers.
market”
Commercialization: is the Introduction of the
New Product into the Marketplace.

When? To
Where? Whom? How?
Go error and Drop error 13

 Go error- when company choose wrong idea to go ahead and

commercialize
 Drop Error – when company drops good idea
New-Product Development Strategy

Reasons for new product failure

• Overestimation of market size
• Poor design
• Incorrect positioning
• Wrong timing
• Priced too high
• Ineffective promotion
• Management influence
• High development costs
• Competition

9-6
 Consumer Buying Behavior

Consumer Buying Behavior refers to the decision process and acts of final
consumers who buy goods and services for personal consumption.

Study consumer behavior to answer:

“How do consumers respond to marketing efforts the company might use?”

The Buyer Decision Process
Need Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Postpurchase Behavior
The Buyer Decision Process
Step 2. Information Search

Personal Sources

Commercial Sources

Public Sources

Experiential Sources
The Buyer Decision Process
Step 3. Evaluation of Alternatives
Product Attributes
Evaluation of Quality, Price, & Features

Degree of Importance
Which attributes matter most to me?

Brand Beliefs
What do I believe about each available brand?

Total Product Satisfaction

Based on what I’m looking for, how satisfied
would I be with each product?
Evaluation Procedures
Choosing a product (and brand) based on one
or more attributes.
The Buyer Decision Process
Step 4. Purchase Decision

Purchase Intention
Desire to buy the most preferred brand
 Post Purchase Behavior
Consumer’s Expectations of
Product’s Performance

Product’s Perceived
Performance

Satisfied Dissatisfied
Customer! Customer
Stages in the Adoption Process

Awareness

Interest

Evaluation

Trial

Adoption
Thank You