New Product Development New Product Development Process Process
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New Product Development New Product Development ProcessProcess
New ProductNew Product
A product new to the world,
the market, the producer,
the seller, or some
combination of these.
New to worldNew to world
New product lineNew product line
Addition to existing pdt line
Addition to existing pdt line
Repositioning,cost reductions
Repositioning,cost reductions
AcquiredCompanies
AcquiredCompanies
Acquired Patents
Acquired Patents
AcquiredLicenses
AcquiredLicenses
New pdt developmentNew pdt development
Strategies for Obtaining New Product Ideas
Categories of New ProductsCategories of New ProductsNew-To-The-WorldNew-To-The-World
New Product LinesNew Product Lines
Product Line AdditionsProduct Line Additions
Improvements/RevisionsImprovements/Revisions
Repositioned ProductsRepositioned Products
Lower-Priced ProductsLower-Priced Products
SixCategories
ofNew
Products
SixCategories
ofNew
Products
Why Do We Develop New Products?Why Do We Develop New Products?
– New technology– Increase sales and profits– Product life cycle and having products in
every stage/shorter cycles – Increased domestic & foreign competition– Change in consumers needs & tastes
/product obsolescence
Causes of New Product FailuresCauses of New Product Failures
Overestimation of market size,– Product design problems,– Product incorrectly positioned, priced or
advertised,– Product may have been pushed despite poor
marketing research findings,– Costs of product development– Competitive actions
Why Do New Products Fail?Why Do New Products Fail?
Shortage of imp. ideas Fragmented markets Social n govt. constraints Costliness of development process Capital shortage Faster development time Shorter product life cycles
Improving New-Product SuccessImproving New-Product Success
New product success depends on having :– Unique superior product (one with higher quality,
features, and value in use) – Well-defined product concept (a defined target
market, product requirements, and benefits).– understand its customers, markets and
competitors, &– develop products that deliver superior value to
customers.
Lessons From Npd In IndiaLessons From Npd In India
Understanding local culture-mcdonalds
Value for money as positioning-Peter England
Pdt. availability in urban n rural
International brand helps firm gain entry.
Idea GenerationIdea Generation
Idea ScreeningIdea Screening
Concept Develop.& TestingConcept Develop.& Testing
Marketing StrategyMarketing Strategy
Business AnalysisBusiness Analysis
Product DevelopmentProduct Development
Test MarketingTest Marketing
CommercializationCommercialization
New-Product New-Product Development ProcessDevelopment Process
Idea GenerationIdea Generation
CustomersCustomers
EmployeesEmployees
DistributorsDistributors
CompetitorsCompetitors
R & DR & D
ConsultantsConsultants
Creative ThinkingCreative Thinking
Sources ofSources ofNew-ProductNew-Product
IdeasIdeas
Sources ofSources ofNew-ProductNew-Product
IdeasIdeas
Idea ScreeningIdea 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:
– Product idea
– Target market
– Market Size
– Product Price
– Development Time & Costs
– Manufacturing Costs
– Rate of Return
Criteria In Reviewing IdeaCriteria In Reviewing IdeaDoes pdt meet need?
Would it offer superior value?
Can it be distinctively advertised?
Does co. have capital & R&D?
Will new pdt deliver sales vol., sales ,growth, profit?
Concept DevelopmentConcept Development
1. Develop New Product Ideas into Alternative Detailed
Product Concepts
2. Concept Testing - Test theNew Product Concepts with Groups of Target Customers
3. Choose the One That Has theStrongest Appeal to Target
Customers
Product Image is the Way Consumers Perceive an Actual or Potential Product
Concept DevelopmentConcept Development
Product idea-possible pdt co. might offer
Product concept-elaborated version of idea in consumer terms
Part Three Describes Long-Term:Sales & Profit Goals-25% mkt share,12%
investmentMarketing Mix Strategy
Part Two Describes First-Year:Product’s Planned Price
Distribution-allowances,free samplesMarketing Budget-adv on tv n print
Part One Describes Overall:Target Market-Young
Planned Product Positioning-low price,good quality
Sales & Profit Goals Market Share-10% to 14%
Marketing StrategyMarketing Strategy
Business AnalysisBusiness Analysis
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Considerations Considerations in in
Business Business Analysis StageAnalysis Stage
Preliminary Demand
Cost
Sales
Profitability
Product DevelopmentProduct Development
quality function deployment-CA-EA– Improves communication b/w marketers,
engineers, manufacturing– Functional aspects n psychological
parameters like size, color, weight Alpha test- test pdt within firm Beta test- customer will use prototype Consumer test-invite consumer to co. n give
them samples
Test MarketingTest Marketing
StandardTest Market
Full marketing campaignin a small number of representative cities.
Controlled Test Market
A few stores that have agreed to carry newproducts for a fee.
SimulatedTest Market
Test in a simulated shopping environment
to a sample of consumers.
Sales wave research
Reoffering pdt or competitor brand
at less cost
Choosing a Test MarketChoosing a Test Market
AdvertisingAdvertising
PackagingPackaging
ProductProductBudget LevelsBudget Levels
Positioning Positioning
DistributionDistributionPricingPricing
BrandingBranding
Elements that May be Test
Marketed by a Company
Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic
Market Settings.
Alternatives to Test MarketingAlternatives to Test Marketing
Single-source research using supermarket scanner data
Simulated (laboratory) market testing
CommercializationCommercialization
ProductionProduction
Inventory BuildupInventory Buildup
Distribution ShipmentsDistribution Shipments
Sales TrainingSales Training
Trade AnnouncementsTrade Announcements
Customer AdvertisingCustomer Advertising
Steps in Steps in Marketing a Marketing a New Product New Product
Steps in Steps in Marketing a Marketing a New Product New Product
Why New Products FailWhy New Products Fail No discernible benefits
Poor match between features and customer desires
Overestimation of market size
Incorrect positioning
Price too high or too low
Inadequate distribution
Poor promotion
Inferior product
Success FactorsSuccess Factors
Match between product and
market needs
Match between product and
market needs
Unique but superior product
Unique but superior product
Benefit to large number of peopleBenefit to large
number of people
Factors in SuccessfulFactors in SuccessfulNew ProductsNew Products
Factors in SuccessfulFactors in SuccessfulNew ProductsNew Products
Global IssuesGlobal Issues
Develop product for potential worldwide distribution
Build in unique market requirements
Design products to meet regulations and key market requirements
DiffusionDiffusion
The process by which the
adoption of an innovation
spreads.
Categories of AdoptersCategories of Adopters
LaggardsLaggards
Late MajorityLate Majority
Early MajorityEarly Majority
Early AdoptersEarly Adopters
InnovatorsInnovators
Categories of Categories of AdoptersAdopters
in thein theDiffusion ProcessDiffusion Process
Categories of Categories of AdoptersAdopters
in thein theDiffusion ProcessDiffusion Process
Categories of AdoptersCategories of Adopters
Pe
rce
nta
ge
of
Ad
op
ters
Time
Innovators2.5%
EarlyAdopters
13.5%
LateMajority
34%
EarlyMajority
34%Laggards
16%
Product Characteristics and Product Characteristics and the Rate of Adoptionthe Rate of Adoption
TrialabilityTrialability
ObservabilityObservability
Relative AdvantageRelative Advantage
CompatibilityCompatibility
ComplexityComplexity
ProductProductCharacteristics Characteristics Predict Rate of Predict Rate of
AdoptionAdoption
ProductProductCharacteristics Characteristics Predict Rate of Predict Rate of
AdoptionAdoption
Marketing Implications Marketing Implications of the Adoption Processof the Adoption Process
Direct fromMarketer
Direct fromMarketer
Word of MouthWord of Mouth
CommunicationAids the
Diffusion Process
CommunicationAids the
Diffusion Process
Product Life CycleProduct Life Cycle
A concept that provides a
way to trace the stages of a
product’s acceptance, from
its introduction (birth)
to its decline (death).
Product Life CycleProduct Life Cycle
Time
Do
llar
s
ProductCategory Profits
ProductCategory Sales
IntroductoryIntroductoryStageStage
GrowthGrowthStageStage
MaturityMaturityStageStage
DeclineDeclineStageStage
0
Introductory StageIntroductory Stage
High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits Promotion focuses on awareness and
information Intensive personal selling to channels
Full-Scale Launch of New Products
Full-Scale Launch of New Products
Growth StageGrowth Stage
Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Promotion emphasizes brand ads Goal is wider distribution Prices normally fall Development costs are recovered
Offered in more sizes, flavors, options
Offered in more sizes, flavors, options
Maturity StageMaturity Stage
Declining sales growth Saturated markets Extending product line Stylistic product changes Heavy promotions to dealers and consumers Marginal competitors drop out Prices and profits fall Niche marketers emerge
Many consumer products are in Maturity
Many consumer products are in Maturity
Decline StageDecline Stage
Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing
expenses
Rate of decline depends on change in tastes or
adoption of substitute products
Rate of decline depends on change in tastes or
adoption of substitute products
Marketing Strategies for PLCMarketing Strategies for PLCINTRODUCTION GROWTH MATURITY DECLINE
ProductStrategy
DistributionStrategy
PromotionStrategy
PricingStrategy
Limited modelsFrequent changes
More modelsFrequent changes.
Large number of models.
Eliminate unprofitable
models
LimitedWholesale/
retail distributors
Expanded dealers. Long-term relations
Extensive.Margins drop.Shelf space
Phase out unprofitable
outlets
Awareness. Stimulate
demand.Sampling
Aggressive ads.Stimulatedemand
Advertise. Promote heavily
Phase outpromotion
Higher/recoupdevelopment
costs
Fall as result ofcompetition &
efficient produc-tion.
Prices fall (usually).
Prices stabilize at low level.