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NEW PRODUCT
DEVELOPMENT
Contents:
 What is new product development??
 Challenges in NPD
 Overcoming these challenges
 NPD Strategies
 New product failures
 Stages in NPD
 Conclusion
What is New Product
Development??
 New product development (NPD) is the
term used to describe the complete process of
bringing a new product to market.
 A product is a set of benefits offered
for exchange and can be tangible (that
is, something physical you can touch) or
intangible (like a service, experience, or
belief).
Challenges in New Product
Development
New Product development challenges fall into
three major categories:-

• Definition of product specifications
• Time and resources issues
• Interactions of the Product Development
group with the rest of the company
How to overcome these
Challenges??
• Assess the projects financial value before the
development starts.
• Prioritize projects according to clear criteria.
• Let Marketing professionals define the target
market and specify the product upfront.
• Involve all the functions of the companies at the
product selection stage.
• Align project targets and resources.
New Product Development
 Strategy
 How do companies develop and market new
 products?
   Come up with own ideas.
       Brand new products
       Product improvements & modifications
   Acquire companies, patents, licenses.
   Eg: Tata nano car
New-Product Failures
• Only 10% of new consumer products succeed in the
  long run.

• Why do most products fail?
  –   Don’t fulfill a real need or want
  –   Overestimation of market size
  –   Design problems that compromise functionality
  –   Incorrectly positioned, priced or promoted (4 P’s)
  –   Pushed despite poor marketing research findings
  –   Development costs go over budget
  –   Competitive response
Major Stages in New-Product
Development Process
Idea Generation
              Where do ideas come from?
• Internal sources:-
  – Company employees at all levels: “Intrapraneuring”
• External sources :-
    Customers
    Competitors
    Distributors
    Suppliers
    Outsourcing partners
Idea Screening
 Keep the good ideas and drop the poor ones.
 Criteria :-
    Market Size
    Product Price
    Development Time & Costs
    Manufacturing Costs
    Rate of Return
Concept Development and
Testing: 1.Develop a working description and
                visualization of the product idea
                 and concept.



                          2. Concept Testing - Test the
                         Product Concepts with Groups
                              of Target Customers




                                  3. Choose the Best One
Marketing Strategy
Development:
              Part One - Overall:
                Target Market
         Planned Product Positioning
             Sales & Profit Goals
                Market Share

             Part Two - Short-Term:
           Product’s Planned Price
                Distribution
              Marketing Budget

            Part Three - Long-Term:
            Sales & Profit Goals
           Marketing Mix Strategy
Business Analysis
  Assess economic viability of the concept.
                       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
Product Development
 Develop concept into physical product prototype.
 Large jump in investment – “point of no return”.
 Test and refine prototype until product passes
 consumer and legal scrutiny.
Test Marketing:
                               Standard
                              Test Market                Controlled
                                                         Test Market
                          Full marketing campaign
                           in a small number of       A few stores that have
                           representative cities.      agreed to carry new
                                                        products for a fee.



                                            Simulated
                                           Test Market
                                          Test in a simulated
                                         shopping environment
After test marketing the “Go Active”        to a sample of
meal (an adult happy meal) in 150             consumers.
markets in Indiana, McDonald’s decided
to sell it across the U.S.
Commercialization:
• Broad launch of product if market test results are
  positive.
• Timing of launch is important.
• Potential Rollout plans
  – Local
  – Regional
  – National
  – International
  – “Wider Test Market”
Conclusion
 Implementation of a NPD process with stages
has helped businesses focus their New Product
investment on the most potentially rewarding
projects.

 It has shortened the time between idea and
revenue by orchestrating the complex set of
activities required for the commercial success of
new products.

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New Product Development

  • 2. Contents:  What is new product development??  Challenges in NPD  Overcoming these challenges  NPD Strategies  New product failures  Stages in NPD  Conclusion
  • 3. What is New Product Development??  New product development (NPD) is the term used to describe the complete process of bringing a new product to market.  A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief).
  • 4. Challenges in New Product Development New Product development challenges fall into three major categories:- • Definition of product specifications • Time and resources issues • Interactions of the Product Development group with the rest of the company
  • 5. How to overcome these Challenges?? • Assess the projects financial value before the development starts. • Prioritize projects according to clear criteria. • Let Marketing professionals define the target market and specify the product upfront. • Involve all the functions of the companies at the product selection stage. • Align project targets and resources.
  • 6. New Product Development Strategy  How do companies develop and market new products?  Come up with own ideas.  Brand new products  Product improvements & modifications  Acquire companies, patents, licenses.  Eg: Tata nano car
  • 7. New-Product Failures • Only 10% of new consumer products succeed in the long run. • Why do most products fail? – Don’t fulfill a real need or want – Overestimation of market size – Design problems that compromise functionality – Incorrectly positioned, priced or promoted (4 P’s) – Pushed despite poor marketing research findings – Development costs go over budget – Competitive response
  • 8. Major Stages in New-Product Development Process
  • 9. Idea Generation Where do ideas come from? • Internal sources:- – Company employees at all levels: “Intrapraneuring” • External sources :-  Customers  Competitors  Distributors  Suppliers  Outsourcing partners
  • 10. Idea Screening  Keep the good ideas and drop the poor ones.  Criteria :-  Market Size  Product Price  Development Time & Costs  Manufacturing Costs  Rate of Return
  • 11. Concept Development and Testing: 1.Develop a working description and visualization of the product idea and concept. 2. Concept Testing - Test the Product Concepts with Groups of Target Customers 3. Choose the Best One
  • 12. Marketing Strategy Development: Part One - Overall: Target Market Planned Product Positioning Sales & Profit Goals Market Share Part Two - Short-Term: Product’s Planned Price Distribution Marketing Budget Part Three - Long-Term: Sales & Profit Goals Marketing Mix Strategy
  • 13. Business Analysis  Assess economic viability of the concept. 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
  • 14. Product Development  Develop concept into physical product prototype.  Large jump in investment – “point of no return”.  Test and refine prototype until product passes consumer and legal scrutiny.
  • 15. Test Marketing: Standard Test Market Controlled Test Market Full marketing campaign in a small number of A few stores that have representative cities. agreed to carry new products for a fee. Simulated Test Market Test in a simulated shopping environment After test marketing the “Go Active” to a sample of meal (an adult happy meal) in 150 consumers. markets in Indiana, McDonald’s decided to sell it across the U.S.
  • 16. Commercialization: • Broad launch of product if market test results are positive. • Timing of launch is important. • Potential Rollout plans – Local – Regional – National – International – “Wider Test Market”
  • 17. Conclusion  Implementation of a NPD process with stages has helped businesses focus their New Product investment on the most potentially rewarding projects.  It has shortened the time between idea and revenue by orchestrating the complex set of activities required for the commercial success of new products.