New Product Development (NPD)

The 4 Elements of The Marketing Mix

Marketing Mix
Product Price Place Promotion

Defining Product
Anything that you can sell

Marketing applies to a broad range of products Physical product Service Events People Ideas Places

Most products are combinations of goods and service

Pure good

Pure service

Core ... Actual ... Augmented product

Successful firms . . .

Fully understand the core benefit sought by customers and start with that concept Consider the enhanced product including delivery, service and complementary goods

The 8-Stage New Product Development (NPD) Process

New Product Development

Key: Recognize when you are in an NPD environment

New Product Development (NPD)

1. Idea Generation & 2. Idea Screening

Generation: Firms are always on the look-out Screening: Fit with manufacturing and distribution expertise Feasibility

3. Concept Screening

Prototype or storyboard Focus group: Would you be interested in a service that . . . Approximation of willingness to pay

4. Marketing Strategy Development and 5. Business Analysis Marketing strategy: Developing credible marketing plans with positioning, target and Marketing Mix Business analysis: Is there a high chance of a good payoff?

6. Product Development
E.g. battery life in iPod

7. Market Testing
Some firms (fashion goods) dont test the market: Put it out there, see if people buy it (the costs of this must be small) = Market test by roll out Simulated test market (dummy store) new product is mixed in with familiars Test markets: Several cities let us tweak the Marketing Mix but rivals may attempt disruption

8. Possible roll-out strategies during commercialization

By geography By market size By customer type (business/consumer/government) By channel of distribution (Rx/OTC) By use (special occasion/every day) By benefit sought

The model for new product adoption applies during roll out

Awareness

Interest

Trial

Repeat

If we are not an instant hit, do the research

Most New Products Fail?

Consumer packaged goods fail most often Brand extensions not sought by consumer (new colors, flavors, packaging) Products that attempt to meet a need that few consumer have (e.g. combination products)

Two forces for NPD

Consumer needs
When the two align, you have a winner!

Technological advances

Big firms take a diversified Portfolio Approach

Potential Payoff
New product to new markets New product to existing markets Add feature to existing product

Improve performance of existing product

Risk

Three keys to NPD

1. Recognize when you are in an NPD situation 2. Understand that therell be many ideas, and a few winners. 3. Tolerate a portfolio of products A few (only a few) high risk products And some no-brainers (with low payoff)