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 planning
On-going market planning
On-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.
