NEW

PRODUCT
DEVELOPMENT
MAMTA
GURTEJ
ARVIND
MANAN

INDEX
New Product Development
What is new product ?
Necessity of new product.
Uses of new product.
Types of new product.
Product development and its process
NPD strategies
Causes of failure.
Forces for NPD
Keys to success of NPD

NEW PRODUCT DEVELOPMENT

(NDP)
New

product development is the entire set

of activities required to bring a new
concept to a state of market readiness.

NDP is

a process which designed to develop, test

and consider the viability of products which are
new to the market in order to ensure the Growth
or survival of the organization.

WHAT IS A NEW PRODUCT ?

A product

that opens an entirely new market.

A product that adapts or replaces an existing
product.
A product that significantly broadens the market
for an existing product.
An old product introduced in a new market.
An old product packaged in a different way.
An old product marketed in a different way.

NEW PRODUCTS NECESSITY

There are at least 3 reasons for which new
products should be developed.
A way

of getting new and keeping old customers

Effective way of obtaining a competitive
advantage
Source of growth and excitement

NEW PRODUCT CAN BE USED

Increase/defend

market share by offering more

choice or updating older products
Appeal to new segments
Diversify into new markets
Improve relationship with distributors
Maintain the firms reputation a leading edge
company
Even out peaks and troughs in demand
Make better use of the organization's resources

TYPES OF NEW PRODUCT

1) New to the world products innovative products
eg:- SONY Walkman , Rayon fiber etc.
2) New product lines Product (not new to the
market), allow the firm to enter an existing market.
eg:- P&Gs first shampoo
3) Addition to product line Product which is
supplemented to the firms existing product line.
eg:- Tide liquid detergent.

CONTI
4) Improvements in existing product- make changes in
the existing product to make it better.
eg:- Enova car model
5) Repositioned products Product targeted to the new use
or new application.
eg:- Aspirin ( Headache reliever & new preventer of
blood clots)
6) Cost reduction- new product that provide similar
performance at lower cost.
eg:- Desktop computers

WHY DEVELOP NDP

To

add to product portfolio

To create stars and cash cows for the future
To replace declining product
To take advantage of new technology
To defeat rivals
To maintain/increase market share
To keep up with rivals
To maintain competitive advantage
To full gap in the market

FACTORS OF NEW PRODUCT

DEVELOPMENT
New product development is a continuous function of
marketing management in the present day highly competitive
environment. In the process of new product development, a
company should keep in mind the following considerations:
Adequate

market demand.
The product should fit into companys present market
structure.
The idea should fit into the companys present production
structure.
The product should fit as per the financial resources
available.
Adequate distribution in depth & breadth.

PRODUCT DEVELOPMENT
Must

be alert to quickly develop opportunities

Focus on markets or product categories
consistent with organizations objectives,
resources, capabilities and strengths
Securing a competitive advantage

NEW
NEW PRODUCT
PRODUCT
DEVELOPMENT
DEVELOPMENT
PROCESS
PROCESS
Marketing
Strategy

Concept
Development
and Testing
Idea
Screening
Idea
Generation

Business
Analysis
Product
Development

Test
Marketing
Commercialization

NEW PRODUCT
DEVELOPMENT STRATEGY
New

Product Development Process:

Stage

1: Idea Generation

Internal idea sources:

R & D
External idea sources:
Customers,
competitors,
distributors, suppliers

3Ms corporate
culture
encourages,
supports, and
rewards new
product ideas
and innovation

New
New Product
Product Development
Development Process
Process
Step
Step 2.
2. Idea
Idea Screening
Screening
Many

companies have systems for rating and

screening ideas which estimate:
Process to spot good ideas and drop poor ones as
soon as possible.
Market Size
Product Price
Development Time & Costs
Manufacturing Costs
Rate of Return
Then, the idea is evaluated against a set of general
company criteria.

1017

3.
3. Choose
Choosethe
theBest
BestOne
One

2.
2. Concept
ConceptTesting
Testing--Test
Testthe
the
Product
ProductConcepts
Conceptswith
withGroups
Groups
of
ofTarget
TargetCustomers
Customers
1.
1. Develop
DevelopProduct
ProductIdeas
Ideasinto
into
Alternative
Alternative
Product
ProductConcepts
Concepts

New
New Product
Product Development
Development Process
Process
Step
Step 3.
3. Concept
Concept Development
Development &
&
Testing
Testing

New
New Product
Product Development
Development Process
Process

Step
Step 4.
4. Marketing
Marketing Strategy
Strategy Development
Development
Marketing Strategy Statement Formulation
Part
Part One
One Describes
Describes Overall:
Overall:
Target
Target Market
Market
Planned
Planned Product
Product Positioning
Positioning
Sales
Sales &
& Profit
Profit Goals
Goals
Market
Market Share
Share

Part
Part Two
Two Describes
Describes Short-Term:
Short-Term:
Products
Products Planned
Planned Price
Price
Distribution
Distribution
Marketing
Marketing Budget
Budget

Part
Part Three
Three Describes
Describes Long-Term:
Long-Term:
Sales
Sales &
& Profit
Profit Goals
Goals
Marketing Mix Strategy

1018

IfIf Yes,
Yes, Move
Move to
to
Product
Product Development
Development
IfIf No,
No, Eliminate
Eliminate
Product
Product Concept
Concept

Business
BusinessAnalysis
Analysis
Review
Review of
of Product
Product Sales,
Sales, Costs,
Costs,
and
and Profits
Profits Projections
Projections to
to See
See ifif
They
They Meet
Meet Company
Company Objectives
Objectives

Step
Step 5.
5. Business
Business Analysis
Analysis
Step
Step 6.
6. Product
Product Development
Development

New
New Product
Product Development
Development Process
Process

NEW PRODUCT DEVELOPMENT

PROCESS
STEP 7. TEST MARKETING
Test Marketing is the Stage Where the Product and
Marketing Program are Introduced into More Realistic
Market Settings.
Budget
Budget Levels
Levels

Product
Product
Positioning
Positioning
Advertising
Advertising

Elements that
May be Test
Marketed by a
Company

1020

Distribution
Distribution

Packaging
Packaging
Branding
Branding
Pricing
Pricing

New
New Product
Product Development
Development Process
Process
Step
Step 7.
7. Test
Test Marketing
Marketing
Standard
Standard
Test
Test Market
Market
Full
Fullmarketing
marketingcampaign
campaign
in
inaasmall
smallnumber
numberof
of
representative
representativecities.
cities.

Controlled
Controlled
Test
Test Market
Market
AAfew
fewstores
storesthat
thathave
have
agreed
to
carry
new
agreed to carry new
products
productsfor
foraafee.
fee.

Simulated
Simulated
Test
Test Market
Market
Test
Testin
inaasimulated
simulated
shopping
environment
shopping environment
to
toaasample
sampleof
of
consumers.
consumers.

WHERE IS A GOOD TEST MARKET?

1. Factors to consider
- Size
- Demographics
- Isolation from other cities
- Media availability and cost
- Retailer support
2. Popular cities
- Big cities: Detroit, St. Louis, Columbus, Philadelphia
- Small cities: Nashville, Jacksonville, Toledo,
Wilmington

New
New Product
Product Development
Development Process
Process
Step
Step 8.
8. Commercialization
Commercialization
Commercialization is the Introduction of the New
Product into the Marketplace.

How?
How?
1023

To
To
Whom?
Whom?

Where?
Where?

When?
When?

Simultaneous

Step 2

Step 1

SPEEDING
SPEEDING UP
UP
Sequential
DEVELOPMENT
DEVELOPMENT

Step 3

Step 4

Step
Step 11
Step
Step 22

Step
Step 33
Step
Step 44

NEW-PRODUCT DEVELOPMENT
APPROACHES

CAUSES
CAUSES OF
OF NEW
NEW PRODUCT
PRODUCT
FAILURES
FAILURES
Overestimation
of Market Size
Design Problems Insignificant difference
Product Incorrectly Positioned, Priced or Advertised
Costs of Product Development
Competitive Actions
No access to the market
Bad timing
To create successful new products, the company must:
Product

understand its customers, markets and competitors

develop products that deliver superior value to customers.

TWO FORCES FOR NPD

Consumer
needs

When the two

align, you have
a winner!

Technological
advances

BIG FIRMS TAKE A

DIVERSIFIED
PORTFOLIO APPROACH
Potential Payof
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.
2.

3.

Recognize when you are in an NPD situation

Understand that therell be many ideas, and a
few winners.
Tolerate a portfolio of products
A few (only a few) high risk products
And some no-brainers (with low payoff)

KEYS TO NEW-PRODUCT
SUCCESS

SUMMARY
New

product development drives growth.

Market research is critical to the success of a
new product launch.
Market research is a continuous process as
customer needs, your business and the
environment changes.