New Product Development

New product development

Group 3

(Muhd Irshad)

New product development:- (NPD) is the term used to describe the complete process of

bringing a new product or service to market.

A variety of perspectives from which to analyse the development of new products :

Considerations when developing a NPD strategy:-

On-going corporate planningOn-going market planningOn-going technology management

NPD as a strategy for growth:• New product development is only one of many options

available to a business keen on growth.• One of the clearest ways of identifying the variety of growth

options available to a business is using Ansoff’s (1965, 1968) directional policy matrix.

• Market penetration (existing markets, existing products): Market penetration occurs when a company enters/penetrates a market with current products. The best way to achieve this is by gaining competitors' customers or convincing current clients to use more of your product/service, with advertising or other promotions. Market penetration is the least risky way for a company to grow.

• Product development (existing markets, new products): A firm with a market for its current products might embark on a strategy of

developing other products catering to the same market (although these new products need not be new to the market; the point is that the product is new to the company).

• Market development (new markets, existing products): An established product in the marketplace can be tweaked or targeted to a different

customer segment, as a strategy to earn more revenue for the firm.

• Diversification (new markets, new products): Virgin Cola, Virgin Megastores, Virgin Airlines, Virgin Telecommunications are

examples of new products created by the Virgin Group of UK, to leverage the Virgin brand.

A product is a multidimensional concept:

Categories of New Products

• New-to-the-world• New product lines• Additions to product lines• Improvements to products• Repositionings• Cost reductions

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Factors That Limit New Product Development

• Shortage of ideas• Fragmented markets• Social and governmental constraints• Cost of development• Capital shortages• Faster required development time• Shorter product life cycles

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Phases of New-Product

Development

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Phases of New Product Development (cont’d)

Idea Generation-Seeking product ideas to achieve objectives• Internal sources: marketing managers, researchers, sales

personnel, and engineers• External sources: customers, competitors, advertising

agencies, consultants, and new-product alliances

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Phases of New Product Development (cont’d)

Screening-Choosing the most promising

ideas for further review• Concerns about cannibalization of

existing products• Company capabilities to produce and

market the product• Nature and wants of buyers

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Phases of New Product Development (cont’d)

Concept Testing-Seeking potential buyers’ responses to a product idea• Low cost determination of initial reaction to product idea• Identification of important product

attributes and benefits

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Concept Testing

• Communicability and believability• Need level• Gap level• Perceived value• Purchase intention• User targets, purchase occasions, purchasing

frequency

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Phases of New Product Development (cont’d)

Business Analysis-Assessing the potential of a product idea for the firm’s

sales, costs, and profits• Does product fit in with existing product mix?• Is demand strong enough to enter the market?• How will introducing the product change the market?• Is the firm capable of

developing the product?• What are the costs for

developing and marketing?

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Phases of New Product Development (cont’d)

Product Development-Determining if producing a product is feasible

and cost effective• Construction of a prototype, or working model• Testing of the prototype’s overall functionality• Determining the level of product quality• Branding, packaging, labeling,

pricing, and promotion decisions

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Phases of New Product Development (cont’d)

• Commercialization• Deciding on full-scale manufacturing

and marketing plans and preparing budgets

• Modifications indicated by test marketing are incorporated into the production design.

• Marketing, distribution, and servicing plans are finalized.

• Product roll-out occurs in stages to lessen the risks of introducing the new product.

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Models of new product development:

Departmental-stage models;

Activity-stage models and concurrent engineering;

Cross-functional models (teams);

Decision-stage models;

Conversion-process models;

Response models; and

Network models.