New Product Development (NPD)

Lecture Outline

 Introduction
 Why Companies launch New Products?
 Role of New Product Development Process in an
Organization
 New Product Categories
 New Product Development Process
 Reasons for New Products Failures
 Consumer Adoption Process
Introduction

 New product development (NPD) is the complete

process of bringing a new product to the market till its
consumption & feedback from the end user of the
business chain through the systematic procedure &
parameter.
 It may be a Consumable product, service or idea.
Why Companies launch New Products?

Choice of Strategy

Organizational Issues

Philosophy of Innovation

Handling Risk
Role of New Product Development Process in an
Organization:
New product development process (NPDP) Ensures that the product-mix matches to the

changing environmental conditions and product obsolescence can be avoided.

NPDP enables the marketer to compete in new and emerging market segments.

NPDP reduces marketer’s dependence on particular elements of a product range or on a

vulnerable market segments.

NPDP helps in filling excess capacity.

NPDP helps in achieving greater long-team growth and profit.

New Product Categories

 New to the world products

 New product lines
 Product line extensions
 Improvements and revisions to existing products
 Repositionings
 Cost reductions
NEW-PRODUCT DEVELOPMENT PROCESS

Idea Generation

Product
Development
Idea Screening

Concept
Development Test Marketing
& Testing

Marketing Strategy
Analysis
Commercialization

Business
Analysis#
 Stage 1:
Idea Generation

Internal sources refer to the company’s own formal research and

development, management and staff, and intrapreneurial
programs

External sources refer to sources outside the company such as

customers, competitors, distributors, suppliers, and outside
design firms

9-9
 Stage 2:
Idea Screening

Idea screening refers to reviewing new-product ideas

in order to drop poor ones as soon as possible
Drop Error: occurs when the company dismisses an
otherwise good idea.
Go Error: occurs when the company permits a poor
idea to move into development and
commercialization.

9-10
 Stage 3

Concept Development and Testing

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

Concept testing refers to new-product concepts with groups of target

consumers
9-11
 Contd.

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 Stage 4

Marketing Strategy Development

Marketing strategy development refers to the

initial marketing strategy for introducing the
product to the market
 Marketing strategy statement
• Part 1:
• Description of the target market
• Product positioning, sales, market share, and profit goals
• Part 2:
• Price, distribution, and budget
• Part 3:
• Long-term sales, profit goals, and marketing mix strategy
 Stage
Stage 55
Business
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Analysis
Business
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Review
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 Stage 6
Product Development
Product development involves the creation and testing
of one or more physical versions by the R&D or
engineering departments
• Requires an increase in investment

9-16
 Stage 7

Test Marketing

Test marketing is the stage at which the product

and marketing program are introduced into
more realistic marketing settings

Test marketing provides the marketer with

experience in testing the product and entire
marketing program before full introduction
9-17
 Marketing Strategy Development

When firms test market

• New product with large investment
• Uncertainty about product or marketing program

When firms may not test market

• Simple line extension
• Copy of competitor product
• Low costs
• Management confidence

9-18
 Test Marketing Process:
Determine Number of Cities
The factor to be considered are
o Representativeness,
o The cost of test marketing

Select Cities
The cities must possess the following characteristics
o Average competition,
o Presence in chain and departmental stores,
o Existence of various types of basic industries, and
o Optimum size of population.

Determine Duration of Test

The duration of testing depends upon the following factors:
o Average purchase period
o The competitive situation,
o Cost of testing

Collection of Necessary Information

It is important to collect the necessary information with respect to the nature of the product, the nature of customers, channels of distribution, buyers’ behavior, etc.

Launching of the New Product

By analyzing test marketing information and taking corrective action the product manager decides to launch the new product.
Approaches to test marketing

• Standard test markets

• Controlled test markets
• Simulated test markets

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Standard test markets are small representative markets where
the firm conducts a full marketing campaign and uses store
audits, consumer and distributor surveys, and other measures
to estimate product performance. Results are used to forecast
national sales and profits, discover product problems, and
fine-tune the marketing program.

9-20
Controlled test markets are panels of stores
that have agreed to carry new products
for a fee
• Less expensive than standard test
markets
• Faster than standard test markets
• Competitors gain access to the new
product
9-22
Simulated test markets are events where the
firm will create a shopping environment
and note how many consumers buy the
new product and competing products.
Provides measure of trial and the
effectiveness of promotion. Researchers
can interview consumers.

9-23
 Stage 8

Commercialization

Commercialization is the introduction of

the new product
• When to launch
• Where to launch
• How to launch
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Successful new product development
should be:
• Customer-centered
• Team-centered
• Systematic

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Customer-centered new-product development focuses
on finding new ways to solve customer problems
and create more customer-satisfying experiences
• Begins and ends with solving customer problems
Team-based new-product development is a
development approach where company departments
work closely together in cross-functional teams,
overlapping in the product-development process to save
time and increase effectiveness
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Team-based versus sequential new-product development
• Team-based can increase tension and confusion
• Team-based is faster and more flexible

Systematic new-product development is an innovative

development approach that collects, reviews, evaluates, and
manages new-product ideas
• Creates an innovation-oriented culture
• Yields a large number of new-product ideas
9-30
Reasons for New Products Failures:

Over Estimation of
Market Size

Poor Product Design

Incorrect Positioning

High Pricing

Ineffective Advertising
Consumer Adoption Process:

Awareness Trial Adoption

Evaluati
Interest
on
Thank
You