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New Product Development
NEW PRODUCT
IMPORTANCE
Company . . .
• Sales Revenue Increase
• Replace “fading”
products
• Spread Risk
• Innovate or Die
Societal . . .
• Create jobs
• Increase standard of
living
• Increase competition
Categories of New products
• New to the Market – Entirely new product
• New Product Lines – Entering established market for the first time ,
Nike-Running shoe to sports market….Athletic shoes,clothing,equipment
• Additions to existing product lines – supplement
established product lines ( Package sizes , flavors , and so on )
• Improvements & Revisions of existing products –
Greater perceived value & replace existing products (Gillette –M3Power,Swift)
• Repositionings - New Market , new segments
1. IDEA
GENERATION
THE NEW-PRODUCT
PLANNING PROCESS
2. PRODUCT
SCREENING
3.
CONCEPT
TESTING
4. BUSINESS
ANALYSIS
5. PRODUCT
DEVELOPMENT
7.
COMMERCIALIZATION
6. TEST
MARKETING
I-Idea Generation & Screening Stage
Idea Generation:
•
NPD starts with Idea Generation --- The
systematic search for New-product Ideas
IBM – ‘Innovation Jam’ – Online suggestion box
(Ideas for new products and services )
Generated 46,000 Ideas from 1,50,000 people in
more than 160 countries over three days )
SOURCES OF NEW PRODUCT
IDEAS
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Product idea
•
Company: customers, R&D,
- sales force, employees
Channel members
Researching Competitors products &
services
Employees - Toyota claims– 2 million
Ideas every year , 85% are implemented
Launch of BYTES – wafer chocolate from
Cadbury India was from a company Driver
The Kitchen Of India brand by ITC was
based on suggestions by master Chef
Government/Universities
Principle: Set the climate for innovation
Case: P&G
P&G emphasizes observational
techniques with its customers.
• Brand marketers spend 12 hours a month with
consumers watching how they wash clothes , cleans
Teeth , clean floors , their habits and sources of
frustration.
• For Diapers mothers bringing their babies to labs to
study.
• To develop Cover Girl – all day lip color it was tested
on 30,000 women.
• They were invited to lab each morning , apply lipstick
and record their activities.
• Torture tests – eating spaghetti to showering.
This blockbuster product was a market
leader.
Idea Committee
Idea Screening:
• minimize risk by
focusing on ideas with
the highest probability
of success
• Drop error
• Go- Error
“I have got a great Idea”
“It won’t work here”
“We have tries it before”
“It will cost too
much”
“Lets discuss it at
our next meeting”
“This isn't the right time”
“It can’t be done”
“Its not the way we do things”
II-Concept Development
&Testing
• Describe a product idea in functional,
objective and subjective terms to
create a product concept (image).
• The product concept is presented to
targeted customers to gain their
reaction(s).
• Product ideas are
accepted/rejected/modified.
A large processing company gets the
Idea of producing a powder to add to
milk to increase its nutritional value
and Taste
This is a product Idea ; but
consumers buy product concepts
Product Idea into several concepts:-
Who will use this product? – it can be
aimed at infants , children , teenagers , or
middle-aged adults or older adults
What primary benefit should this product
provide? – Taste , Nutrition , refreshment ,
energy
When will people consume this drink? –
Breakfast , mid-afternoon , dinner , lateevening
By answering to this company can form several concepts:
Concept – 1 An instant breakfast drink for adults who want a
quick nutrition breakfast without preparation
Concept – 2 A tasty snack drink for children as a midday
refreshment
Concept – 3 A health supplement for older adults to drink in
the late evening before they go to bed
Concept testing
• Elaborated version of test :
“ Our product is a powdered mixture that is added to milk
to make an instant breakfast that gives the person all
the needed nutrition among with good taste and high
convenience. The product will be offered in three flavors
( Chocolate , Vanilla and Strawberry) and would come in
Individual packs, ten to a box, at Rs. 110 a box )”
New Product Development Process
Step III. Marketing Strategy Development
Marketing Strategy Statement Formulation
Part One Describes Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Part Two Describes Short-Term:
Product’s Planned Price
Distribution
Marketing Budget
Part Three Describes Long-Term:
Sales & Profit Goals
Marketing Mix Strategy
For instant breakfast milk is families with children
who are receptive to new , convenient , nutritious
and inexpensive form of breakfast
Positioned at Higher price , higher quality end of
the instant-breakfast drink category
Initially 10% of market share with a loss not
exceeding Rs. 50 million , next year 14% market
share with profit Rs. 110 million
It will be offered in three flavors Vanilla ,
Chocolate and Strawberry and sold at Rs.
110 a box , Schemes for dealers , Sales
promotion budget , Advertising budget of 175
million : Television and print
The company intends to win 25% market share and
realize after tax return on investment of 12%
Quality to be improved with time
Price initially high and then lowered gradually
Promotion budget to be boosted each year by
about 20% and so on
New Product Development Process
Step 5. Business Analysis
Step 6. Product Development
Business Analysis
Review of Product Sales, Costs,
and Profits Projections to See if
They Meet Company Objectives
If No, Eliminate
Product Concept
If Yes, Move to
Product Development
Step 6 : Product Development
• Prototype Development Stage
• Converts a product idea into a physical form (prototype)
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R&d
Value analysis of components
cost - quality-performance tradeoffs)
Packaging choices
Time consumption
At Gillette almost everyone gets involved in new-product testingevery working day 200 volunteers from various departments come
to work unshaven , troop to the second floor.
“We will bleed so you’ll get a good shave at home.” says a Gillette
employee .
New Product Development Process
Marketing
Step 7. TestTest
Marketing
Standard
Test Market
Controlled
Test Market
Full marketing campaign
in a small number of
representative cities.
A few stores that have
agreed to carry new
products for a fee.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
P&G did in Pakistan
to launch
a brand of Ariel
New Product Development Process
Step 8. Commercialization
Commercialization is the Introduction
of the New Product into the Marketplace
When?
Where?
To
Whom?
How?
P&G
• Crest was the product that had taken a long time to
develop. It took fifteen years after stannous fluoride had
been identified as a potential anti cavity fighter to
introduce Crest toothpaste in 1955.
• P&G sometimes took several years to develop a
product. In the case of "Pampers", it took more than ten
years just to figure out how to develop the product and
commercialize production.
New Product Adoption Process
Awareness
Interest
Evaluation
Trial
Adoption
Loyalty?
Influences on the Rate of Adoption
of New Products
Communicability
Relative Advantage
Can results be easily
observed or described
to others?
Is the innovation superior
to existing products?
Divisibility
Product
Characteristics
Compatibility
Does the innovation
fit the values and
experience of the
target market?
Can the innovation
be used on a
trial basis?
Complexity
Is the innovation
difficult to
understand or use?